NETHERLANDS – The €16.2bn Dutch Shell Pension Fund achieved a 20.9% total return for 2005, and outperformed its benchmark by 4.5%.
The total return for 2004 was 16.1%.
“Good” equity and bond performance – more than 25% and 11% respectively - also saw the fund increase its funding ratio (at market interest rates) to 145% from 139%.
This was despite a roughly 10% increase in liabilities largely attributable to lower long-term interest rates.
The equity portfolio – making up 68.4% of the scheme’s investment portfolio with €11bn – saw good returns of small caps in Europe and Japan.
Japan was the best performing regional market (+56%), followed by emerging markets (+35%) and Europe (+32%). The North-American portfolio returned 7% and the Pacific Rim excluding Japan returned 12%.
Fixed income – comprising 25.3% of the scheme’s portfolio or €4.1bn - returned well over 11% with highest returns in the Euro Candidates sub-portfolio (16%), with Turkey the clear winner (32%).
Emerging markets debt yielded 13%, and on government bonds the scheme booked a total 10% return, said Shell. The corporate bond portfolio returned just 6% for the year.
The scheme’s chief investment officer Sijb Bartlema told IPE: “Equity and fixed income produced equally good results.” Furthermore, a fixed income return of more than 11% is higher than most schemes, which usually return around the 10% mark.
However, for hedge funds (6.6% of the scheme portfolio or €1.1bn), 2006 was “a relatively subdued year”, returning 4.5%.
“The pension fund invests solely in hedge funds that pursue ‘market-neutral’ strategies, which typically are less risky. Since inception (October 2001), the pension fund’s hedge fund portfolio has yielded 5.8% annually, with a fairly low level of volatility (1.6%),” said the scheme.
Private equity makes up 3.9% of the portfolio or €600m.