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Océ pension scheme drops derivatives for rebalancing

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NETHERLANDS - The €827m pension fund of copying machine manufacturer Océ has said it will no longer use derivatives to rebalance its portfolio.

In its annual report for 2011, the Dutch scheme said it would seek to reduce complexity in its portfolio by adjusting its actual investments.

Following an asset-liability management study, Océ introduced a portfolio specifically aimed at managing its interest risk.

The decision to split its assets into matching and return portfolios came after the scheme’s governance body criticised the “insufficiently transparent” instruments for hedging interest risks.

Last year, the Océ scheme returned 6.1%, with 1.8 percentage points coming as the result of an interest hedge.

The best performing asset class was its 53% fixed income portfolio, which generated 9.3%.

By contrast, the scheme’s 31% equity holdings lost 2.5%, mainly due to “disappointing” returns in Asia.

It added that its listed property investments returned 4.1%.

Meanwhile, Stichting Pensioenfonds Océ confirmed that it would cut rights by 5.7% for all 8,445 of its participants on 1 August 2013 if its financial position failed to improve by next year.

At the end of last June, its coverage ratio had fallen to 80.4%, due mainly to falling long-term interest rates, the criterion for discounting liabilities.

Océ said the employer would offset two-thirds of a shortfall if the scheme’s funding failed to recover to at least 105% by 30 June 2013.

The coverage ratio has fallen by more than 17 percentage points over the past 12 months.

The pension fund has already raised its contribution from 22.8% to 30% of the pensionable salary.

The Océ scheme has 3,385 active participants, 2,885 deferred members and 2,175 pensioners.

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