The €1.7bn Dutch pension fund of coffee producer Douwe Egberts (DEPF) is planning to increase its return portfolio to increase the potential of generating long-term returns.
The adjustment will come at the expense of its 60% matching portfolio, which the scheme will cut to 50% of total assets.
The DEPF said it would reduce holdings in long-term government bonds and interest swaps from 31% to 25%, while lowering its credit allocation from 24% to 20%.
It will maintain its residential mortgage exposure at 5%, however.
The return portfolio is to be increased to 50% of total assets, partly by raising the allocation to developed-market equities from 25% to 30%.
The DEPF is also thinking to increase exposure to indirect property and emerging market equities from 5% to 7.5%, while ramping up holdings in emerging market debt, from 2.5% to 5%.
The scheme will divest its 2.5% commodity allocation entirely.
The DEPF expects to maintain its new investment strategy for at least the next three years.
As part of the portfolio reshuffle, it adjusted the allocation of the €50m financial reserve aimed at indexation for its 2,225 active participants, which had been fully invested in credit.
It replaced one-quarter of the portfolio, which generated 9.7% in 2014, with develop-market equities.
The scheme also introduced a dynamic interest-risk hedging policy – in increments of 35%, 50%, 65% and 80% – with the level of cover following interest rates.
It will reduce the interest hedge from 50% to 35% this year as a consequence of the new policy.
Last year, the Douwe Egberts scheme reported an 18.8% return.
It warned that it may be unable to grant indexation on 1 January, as its official policy funding ratio was 110.9% as of the end of September.
Under the new financial assessment framework (nFTK), pension funds are prohibited from paying inflation compensation if their policy coverage is less than 110%.
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