NETHERLANDS - The €3bn pension fund for the Dutch hotel and catering industry has decided to strategically target a 75% interest hedge on liabilities.
The decision follows the outcome of an asset-liability management (ALM) study that had been brought forward to improve balance management.
Although its hedging policy through swaptions kept the scheme's loss limited to 14.8%, rather than 25.1% without hedge in 2008, last year's rising interest rates and falling volatility on the interest markets limited the scheme's returns by 9.3 percentage points to 12.2%.
Pension fund officials said: "The ALM study has shown the interest hedge remains important because our many young participants make the pension fund very liable to interest rate changes."
They added that the scheme had postponed meeting the allocations to infrastructure, global unlisted property and care-related property, as the added value "appeared to be marginal".
In a bid to speed up its recovery process, Horeca and Catering has decided that both workers and employers will pay an additional contribution of 2.5%.
The pension fund said it would not grant indexation for 2009-10, or create any provisions for additional pension improvements before 2012.
Further, the pension fund said it had introduced an investment advice committee for external and independent expertise.
The scheme's funding ratio was 97% at the end of last June, a drop of 13 percentage points since year-end.
Officials said the scheme had already eliminated its 7.4% underweighting of securities in the first quarter of 2009 due to its long-term investment horizon.
They said this decision had contributed to the recovery process in 2009, adding that the strategic asset mix had been kept at 50% securities, 40% fixed income and 10% property.
Equity and fixed income returned to 30.6% and 10%, respectively, with convertible bonds generating 37.2%, largely due to positions based on the expected economic recovery, according to the scheme.
Its private equity portfolio lost 3.2%, whereas its derivatives-based investments in commodities returned 36.2%.
Listed property and non-listed property returned 34.2% and 0.2%, respectively.
The portfolio is still largely actively managed (85% of assets), with only two mandates being passively managed (15%).
Horeca and Catering has fully outsourced its asset management and appointed the Bank of New York Mellon as its custodian last year.
Its pension administration, board support and fiduciary asset management is carried out in-house.