SPT, the €1.8bn closed pension fund for dentists in the Netherlands, has ruled out transferring its assets to an insurer, instead preferring to remain as an independent entity.
In the fund’s annual report for 2015, it argued that it still could serve its 3,125 participants and 3,920 pensioners through low provider costs and offering the option of indexation.
Last year, the board decided to reject a quote of Aegon for insurance-based arrangements, as the offer was “not beneficial”, according to the scheme’s accountibility council (VO).
The board, however, added that its wish to offer inflation compensation was a long-term goal, rather than something it was immediately able to act on.
At April-end, the fund’s official policy funding level stood at 106.8%, after remaining around 108% over the course of last year.
Under the rules of the new financial assessment framework (nFTK), partial indexation can only be offered once the policy funding level stands at 110% or above.
SPT reported a positive result of 0.22% over last year, but added that it suffered losses on several hedging strategies, including its equity cover.
As the value of its put options dropped as a consequence of rising equity markets, the pension fund had to accept a lower yield on stock.
Combined with a loss on its currency hedge, the net result on equity was 3.4%, despite an actual return of more than 11%, an outperformance of 0.5 percentage points.
SPT’s 21% equity portfolio has been fully and passively invested in global developed markets.
It has fully hedged the risk on the six largest currencies, and lost on its cover as the main currencies appreciated relative to the euro.
Meilof Snijder, the scheme’s temporary chairman, said the scheme lost 0.12% on its 77.1% fixed income holdings, which included a 9.8% stake in money market funds managed by BlackRock.
This was caused by a 0.73% loss on its derivatives.
The actual return of its fixed income holdings had been 0.61%, and, in particular, NN Investment Parters’ Fixed Income All Grade Fund outperforming its benchmark, according to the pension fund.
At year-end, the dentists scheme was hedging the interest risks of 86% of its liabilities through government bonds and swaps.
It said that, at this hedge level, a 2 percentage point rise in interest rates could cause its assets to drop by almost €350m.
But as liabilities would also fall, its funding would remain “relatively stable”, SPT said, which has extended its contract with risk manager Cardano for developing and implementing its matching portfolio.
Last year, SPT replaced NNIP for Lombard Odier as fiduciary manager and extended the mandate for custodian Kas Bank to include asset management reporting.
The pension fund incurred 0.17% and 0.08% in asset management and transactions costs, respectively. It spent €236 per participant on pensions administration.