NETHERLANDS - The €600m retirement bridging fund for Dutch professional footballers (CFK) has generated a 4% return on investments, after allocating all of its assets to fixed income.

Stichting Contractspelersfonds KNVB, or the Contractplayers' Fund of the Dutch football authority is not considered to be a true pension fund as described under the Pensions Act. But it is designed to bridge the income gap between a player's career and a new normal career in society - extended its fixed income target allocation from 85% to 100% in mid-2008, according to the annual report spanning 1 July 2008 and 30 June 2009.

After divesting its equity, property and commodities portfolios, CFK initially allocated one-third of its assets to a fixed income mandate of government and corporate bonds, whereas the remaining assets were placed as deposits with two banks.

At the same time, the interest rate risk of most of its fixed income mandate was extensively hedged - through interest rate swaps - as the scheme's investment horizon is much shorter than a traditional pension fund's, explained Ben-Ivar Kolster, CFK's managing director.

The footballers' scheme has so far raised its allocation to 75% bonds at the expense of its liquid assets, because of the decreasing interest rates on deposits, the managing director pointed out.

According to Kolster, CFK had been hit by a decrease in the value of corporate bonds and from interest rates, which created a negative valuation on its interest rate derivatives. The scheme has subsequently limited its hedge to 20 and 30-year commitments, he said.

That said, CFK has, on balance, further benefited from the recovering fixed income markets, following interest rate cuts by central banks as well as ‘quantitive easing', according to Kolster.

The scheme also said it has indefinitely postponed the introduction of investment choice for its participants, as two selected providers withdrew from proceedings at the last minute.

However, CFK said officials do not foresee a change in investment mix before next summer "as we have returned 3.5% on investments since 1 July".

Participants who entered the scheme after 1 November 2008 will receive indexation based on the consumers index , whereas existing participants' benefits will be topped-up at a fixed rate of 4%.

CFK also admitted its efforts to increase transparency through the supervision of pensions regulator De Nederlandsche Bank (DNB) have not been successful.

"Since we are neither a true pension fund nor a real life insurer, the discussions with DNB make it clear that we are too different to fit within its supervisory structure," explained Arco van der Veer, operational manager. He stressed CFK is instead researching whether supervision from the Authority Financial Markets (AFM) is possible.

The Stichting Contractspelersfond KNVB provides bridging arrangements to 2,250 players, of whom 950 are receiving benefits. Its 1,250 active participants contribute 35% of their salary on average.

Although the CFK also provides bridging arrangements for approximately 100 professional racing cyclists, it said the Dutch Treasury has declined to also offer tax-facilitated participation to other groups of professional players "as it might lead to the unequal treatment of other professional groups".