NETHERLANDS - The €1.3bn pension fund for the Dutch meat industry returned 9.2% on investments last year but lost 5 percentage points of its return to its interest rate hedge following the rise in long-term interest rates last year.
However, the fund decided to continue to cover 75% of its liabilities with a dynamic hedge through a combination of swaps and swaptions, according to the fund's annual report for 2009.
Nevertheless, the fund still had a cover ratio of 123% at year-end, which is 9 percentage points above its required financial buffer.
That said, its cover ratio has decreased to over 119% at the end of last July, following a steep drop in long-term interest rates in the second quarter, Wim van den Brink, the scheme's chairman said.
In order to decrease its risk profile, the scheme said it has commissioned a risk assessment, adding that an external adviser has been appointed to improve its investment policy and investment portfolio.
Van den Brink also said his scheme will continue deploying three part-time pension advisers, who visit workers and employers to explain pension arrangements and administrative processes.
With a 2009 return of 35.1%, the scheme's 19.6% equity allocation was the main contributor to its overall return. Officials said the pension fund benefited from investments in well-performing European and US companies.
Its 38.3% portfolio of direct retail and domestic property generated 0%, "thanks to decreased rental fees in its overweighed allocation to the retail sector," according to the annual report.
"Although our large property portfolio has served us well during the past decades and has greatly contributed to our present financial position, we have now decided not to extend our property holdings, and only replace less attractive real estate by more current property," Van den Brink pointed out.
According to the scheme, its 35.9% fixed income allocation returned 10.6%, but fell short of its benchmark, due to under-weighted positions in the financial sector and high yield bonds.
It also said that its tactical asset allocation generated a modest profit, thanks to overweighed equity in the last two quarters.
Although the butchers scheme had granted a 2.8% indexation on 1 January 2009, it said it refrained from indexing last January, "as there inflation was non existent in 2009".
The pension fund for the meat industry has outsourced its asset management, property management as well as its pension administration to Syntrus Achmea.