Progress, the €4.8bn defined benefit pension fund for the Dutch employees of Unilever, is to scale back investment risk as the fund is closed to new entrants.

According to its 2015 annual report, Progress will cut its current 32% equity allocation by 10 percentage points in favour of growing its fixed income holdings.

It will also link its interest hedge to the 30-year swap rate instead of its coverage ratio, which stood at 130% as of the end of March.

As a consequence, it has lowered its interest hedge to 32.5% of the nominal interest risk, to benefit from rising interest rates.

It said the increased short-term risk of the move was acceptable, as it expects interest-rate risk to fall over the long term.

Progress has also dropped its dynamic, anti-cyclical investment policy.

To further diversify, it increased exposure to Dutch mortgages – the best-performing asset class within its fixed income portfolio, returning 7.2% – from 13.8% to 19.4%. 

It has also started investing in European senior loans, as well as environmental, social and governance (ESG) “value creation”, targeting sustainable agriculture and energy, as well as hygiene.

The Unilever scheme reduced its commodities allocation from 5% to 4.4%, as the asset class “contributed insufficiently to diversification”.

It said it would cut its commodities exposure – which last year produced a 32.3% loss – even further.

Private equity, in contrast, generated 30.1%.

Progress also reported positive results on real estate (14.1%), fixed income (4.2%) and equity (9.4%).

The pension fund reported an investment return of 0.2%, after losses of 3.5% on its 80% hedge of the main currencies, 1% on its interest cover and 0.9% on its 50% inflation hedge.

Progress closed to new entrants at the start of last year; pensions accrual is now taking place in its new collective defined contribution scheme Forward.

The two pension funds, which already share pensions-provision costs, have applied for a licence to run a new low-cost ‘general’ pension fund, or APF.