The €2bn Dutch pension fund of Hewlett Packard said it had divested its hedge funds holdings and had invested in Dutch residential mortgages at the expense of global bonds.
In its annual report for 2018, it also said it had sold part of its stake in developed equities in favour of indirect real estate, and had replaced asset-backed securities with credit.
The changes came in the wake of an asset-liability (ALM) study conducted in 2015, which had led to a matching portfolio comprising holdings in BlackRock liability-matching funds (40% of the scheme’s total portfolio), European credit (5%) and mortgages (10%).
The strategic asset mix in the scheme’s return portfolio now consists of global equity (20%), emerging market equities (7.5%), indirect real estate (7.5%) as well as emerging market debt and high yield credit, with 5% each.
The Hewlett Packard scheme, which reported an annual loss of 1.3%, added that it was still seeking a new manager for its credit mandate.
As it still had to decide whether the mandate would focus on European or global credit as well as on whether to be actively or passively managed, it would address the issue in a new ALM study this year, it indicated.
The scheme has hedged 60% of the interest risk on liabilities, and said it would consider raising the cover to 80% if its funding – 110.2% at the end of last July – exceeded 120%, it said.
It has fully hedged the currency risk of its holdings in US dollars, sterling and yen in its return portfolio.
Administration costs up as supervisor demands heeded
The scheme’s administration costs rose 40% to €680 per participant, which Marcel Lasonder, the pension fund’s chairman, attributed largely to the implementation of an instruction from supervisor De Nederlandsche Bank (DNB).
He said the watchdog had not been satisfied with the scheme’s improvement in risk analysis and non-financial risk policy it had recommended in 2015.
According to Lasonder, DNB had also concluded that the scheme’s board had not provided the pensions provider with sufficient guidance.
Speaking to Dutch pensions publication Pensioen Pro, Lasonder said he could not specify the material improvements the pension fund had made, but noted that it had not received any complaints from members in the past.
Lasonder said that the costs increase had also been due to the scheme responding to three participating employers’ desire for clarity about their individual assets in the pension fund as well as the coverage ratio per “compartment”.
The Hewlett Packard scheme has 1,375 active participants, 6,355 deferred members and 2,325 pensioners.