NETHERLANDS - The €8.8bn pension fund of ABN Amro managed to limit its losses to 1.6% in 2008 thanks to the introduction of ‘dynamic rebalancing policy’.

As part of its new policy, the scheme’s fixed income allocation was raised from 50% to over 84% and placed in a matching portfolio, which returned 21.7%, the scheme pointed out in its annual report.

The remaining assets were placed in a returns portfolio, to generate extra yields for future indexation.

However, the pension fund’s figures revealed that the overall returns were -42% last year.

The 80% equity part of the return portfolio presented a loss of 39.6%, while the commodities performance slumped by 42.4%.

In contrast, investments in unlisted indirect Dutch property returned 4.1%, according to the Stichting Pensioenfonds ABN Amro.

Following the significant reallocation, combined with a limited fall in assets, the scheme steered clear off a regulatory reserve shortfall and maintained a cover ratio of 106% to the end of 2008.

It had fallen some way, however, as at the end of 2007 the nominal cover ratio was still 139%, whereas the real cover ratio at the end of 2008 was 74%, according to the scheme.

The former bank’s pension fund now applies the forecasted benefits discounted by the forward curve of pensions regulator De Nederlandsche Bank as the benchmark for its matching portfolio, according to officials.

“As the options to purchase long-term bonds are limited, replicating the benchmark is carried out through interest rate swaps,” explained officials, adding that the number of asset managers employed has been raised from one to three.

That said, the ABN Amro scheme has parted with a number of asset managers under its own new criteria for active versus passive asset management.

Interestingly, the report also revealed that an analysis of counterparty risk and the set-up of collateral management has led to the decision to stop securities-lending.

The Dutch government became the owner of ABN Amro’s Netherlands and private clients business units, last year, following its acquisition of Fortis Netherlands - The bank which had earlier bought ABN Amro.

“For the time being, this is not affecting the pension fund,” commented officials.

Despite its relative healthy position, the scheme’s board has decided not to grant its participants compensation for a 1.9% rise in the consumer’s index in 2008.

The pension fund’s 24,115 active participants, 38,410 deferred members and 17,190 pensioners received full indexation of 2% for the previous year.

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