Elsevier scheme drastically alters asset mix
NETHERLANDS - The €500m pension fund of publisher Elsevier has decided to drastically change its strategic asset mix, in order to be better prepared for the present market conditions.
Based on an ALM study, the scheme will decrease its equity portfolio from 60% to 37.5% of its assets, and increase its fixed income investments from 35% to 47.5%, the fund revealed in its annual report.
In addition, Stichting Pensioenfonds Elsevier-ondernemingen will double its allocation to property to 10% and will introduce a commodities portfolio, comprising of 5% of its assets.
The scheme reported an overall return of 0.2% so after an indexation of 2.75% last year, its cover ratio had fallen by 5% to 137.3% by the year-end.
However, the situation worsened at the beginning of the year as the value of its equity investments dropped, along with decreasing interest rates and underperforming external asset managers, and the scheme's funding ratio had decreased to 120% during the first quarter of 2008, according to the scheme.
Its required minimum financial buffer corresponded to a funding ratio of 119% by then.
Elsevier's equity portfolio yielded 8.4% in 2007, while fixed income and property delivered negative returns of -8.2% and -12.7% respectively.
According to the scheme, the currency risks of its non-euro investments are largely hedged. However, the non-hedged risks in emerging countries created an underperformance of 0.5%.
Moreover, disappointing results of corporate bonds - among financial institutions in particular - within LDI mandates, led to an additional performance loss of 0.9%, the pension fund reported.
The fund is now looking for ways to further decrease the risk profile of its investments, the scheme said.
Last year, the Pensioenfonds Elsevier-ondernemingen contracted out the management of its fixed income portfolio - aimed at covering the scheme's liabilities - to Aberdeen and Fidelity in LDI mandates of €125m each.
The scheme also placed two global equity mandates of €140m each with AllianceBernstein and JPMorgan respectively, in 2008.
The equity mandates have been divided up according to the MSCI World All-Country index, including emerging markets, while Kas Bank was tasked with monthly reporting, the pension fund pointed out, adding the equity portfolio must help to finance indexation.
The scheme's board has allocated a further €20m to Aberdeen's European Balanced Property Fund and €40m to JPMorgan's European Property Fund, to be invested in 2008.
The Elsevier pension fund has 2,830 active participants, 3,550 deferred members and 1,040 pensioners.
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