Hoogovens has hired an external expert to improve the execution of its strategic investment policy and risk management after Dutch regulator De Nederlandsche Bank (DNB) criticised the €7.6bn scheme.

According to Hoogovens’s 2014 annual report, the regulator ordered the pension fund to pay greater heed to the prudent person principle and take steps to comply with updated legislation.

Hans van de Velde, director at Hoogovens, said the regulator’s comments had not been aimed at the scheme’s approach to cashflow-matching, designed to balance investments with liabilities through cashflows with low credit risk.

According to Van de Velde, the regulator said it wanted processes at Hoogovens to be more formalised, and that the scheme keep more up-to-date policy documents.

“It is the new spirit of the times, which requires improved accountability,” he said. “As a consequence, we are screening our entire investment policy.”

In Hoogovens’s annual report, the supervisory committee said the board was “dealing seriously” with the regulator’s conclusions, while Van de Velde said the scheme expected to implement all recommendations by year-end.

The Pensioenfonds Hoogovens reported an investment return of 14.9%.

The 57% matching portfolio, comprising AAA government bonds, interest and inflation swaps, returned 15.9%, while the 43% return portfolio returned 8.3%.

However, because liabilities rose by 19.8% on the back of dropping interest rates, the pension fund saw its funding fall by 6.5 percentage points to 116.2%.

As its coverage ratio initially exceeded the required level of 119.6%, Hoogovens granted a 1% indexation in arrears during the summer.

Last year, the board terminated a 40% interest hedge on liabilities in real terms, while maintaining a 60% hedge of the interest risk on its nominal liabilities.

It explained its decision by arguing that the risk of a “Japan scenario”, with falling inflation and rising interest rates, had become too big.

The Hoogovens scheme said it had nearly completed its withdrawal from funds of hedge funds last year, citing “the low net returns as a consequence of high performance fees, as well as the lack of transparency and liquidity”.