NETHERLANDS – Vervoer, the €14.5bn pension fund for private transport in the Netherlands, has confirmed it will stick with a defensive strategy adopted in 2012, increasing its exposure to equities only slightly – by 1.5 percentage points to 34.5%.
According to its annual report, it also increased its allocation to liquid assets to 2.5% to reduce liquidity risk, adding that its focus for 2013 would be on managing operational risks, particularly on illiquid investments.
The scheme reported a return on investments of 14.6% over the period.
It attributed a 1.2-percentage-point underperformance relative to its benchmark to “disappointing” results on its mortgages portfolio, the downgrade of an undisclosed “illiquid investment” and its initial choice for an active benchmark for its derivatives portfolio.
Vervoer’s 69.5% fixed income portfolio delivered 10.2%, with emerging market debt producing the best results, returning 16.1% in hard currency and 16.5% in local currency.
Global high-yield credit returned 14%, while US government bonds returned 1%.
The pension fund’s 26.2% equity allocation returned 16.9%, with holdings in Asia excluding Japan and Europe returning 20.3% and 20.7%, respectively.
Vervoer said it reduced its full strategic interest hedge on liabilities – under application of the ultimate forward rate – to 90% in 2013.
Last year, it also reduced its full currency hedge on the US dollar, the British pound and the yen to 70%, in anticipation of a euro crisis triggering a drop of the currency.
The scheme reduced counterparty risk by adding four new counterparties for its derivatives policy, updating its existing contracts and improving the quality of collateral.
At the start of 2013, it raised contributions to 30% of the salary, while “temporarily” reducing the yearly pensions accrual to 1.85%.
As of the end of July, its coverage ratio was 105.8%.
The transport scheme has 164,000 active participants, 362,000 deferred members and 79,000 pensioners, affiliated with 8,580 employers.