Hedge limits Dutch retail funds loss
NETHERLANDS - The €6.9bn pension fund for the retail sector (BD) says it limited its loss to -1.1% in 2008, thanks to an interest rate hedge on two-thirds of its liabilities.
Without its dynamic hedging strategy - a combination of swaps and swaptions - the returns would have been -13.6%, Benne van Popta, the scheme's employers' chairman, told IPE.
With a return of 5.1%, the 58% fixed income allocation of Bedrijfstakensioenfonds Detailhandel was the best performing asset class, whereas its 27% equity portfolio returned -40.2%, according to its annual report.
While the 9% allocation to - largely Dutch - direct property returned 3%, the 2% of the assets invested in indirect real estate returned -49.9%. The 2% alternatives portfolio of private equity and infrastructure returned 2.3%.
The fund also indicated it will not change its asset mix as part of its recovery plan - with fixed income overweight by 5% and equity underweight by the same percentage.
"The risks of our present mix better match the current cover ratio than the risks of our strategic asset mix," an official said.
Because the contribution level has been fixed at 16.2% until 2011, the fund also suggested that the main instrument for recovery will be to refrain from indexation in coming years.
However, the pension fund's cover ratio has now risen to 103%, according to Van Popta.
Last year, the Pensioenfonds Detailhandel introduced a governance bureau for board support and also set up advisory committees, which address asset management and investment policy separately from asset-liability management and continuity analyses, the chairman pointed out. Other committees examine pension arrangements and communication.
The pension fund has contracted out it its pension and asset management to Syntrus Achmea.
Pending the development of a new model for contracting out the asset management, the present arrangements have been extended until the end of 2010, according to Van Popta, who also said that a new contract for pension administration had recently been negotiated.
Bedrijfstakensioenfonds Detailhandel has 240,000 active participants, 637,000 deferred members and 58,300 pensioners. The number of affiliated employers totals 29,900.