NETHERLANDS - The €3.5bn pension fund for the painting, finishing and glazing sector said last year's disappointing performances of external managers will not automatically lead to the termination of contracts.

Arjan Vermaire, deputy manager asset management of BPF's fiduciary manager A&O Services, explained to IPE "most of the results during 2007 can be attributed to system factors, caused by the credit crunch."

The industry-wide scheme reported negative returns of -0.6% in its annual figures, against a benchmark of 0.6%.

Further evidence shows the pension fund's returns were in negative territory during the first quarter of 2008 at -2.2%, and at the end of March its cover ratio had dropped by almost 12 percentage points to 136%.

BPF's hedge funds portfolio generated a negative yield of -2.3% last year, falling 8.7% short of its benchmark thanks largely to GTAA strategies, according to the scheme.

The new asset classes infrastructure and private equity also saw negative returns of -14.1% and -13.3% respectively, while both being benchmarked for the long term at 8.6%, the scheme said, partly attributing the results to ‘initial losses'.

Nevertheless, the pension fund has committed itself to allocate 2% of its assets to infrastructure and 3% to private equity, at the expense of the equity portfolio which will decrease to 25%, Vermaire made clear.

Within the equity portfolio, the focus on emerging countries will be increased from 8% to 11%, he added.

BPF's 2.6% allocation to commodities was its best performing asset class as the portfolio delivered a return of 30.4%, while property yielded 11.6%.

The Bedrijfspensioenfonds voor het Schilders, Afwerkings en Glaszetbedrijf has hedged the interest risks on its liabilities for over 75% through swaps, and the remainder through ‘swaptions'. The portfolio is being managed by BlackRock.

BPF hedged 49% of the currency risk on non-euro investments - totalling 32% of its portfolio - it also said.

Besides in-house managed government bonds and euro credits, A&O Services has contracted out the management of BPF's assets and applied a multi-manager approach to every single asset class, according to Vermaire.

That said, Vermaire was unwilling to reveal who the underperforming managers were.

The painters' scheme has granted its 42,400 active participants, 74,710 deferred members and 32,755 pensioners an indexation of 1.75%. It decreased the contribution for its participating painters by 1% to 26.5% last year.

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