NETHERLANDS - The €1.2bn pension scheme Provisum has revealed investment models which could not deal with the volatility in the financial markets last year caused negative returns of -26% on investments in Global Tactical Asset Allocation (GTAA).
The clothing retailer C&A said in the annual report for its Provisum pension scheme as well as diversifying its GTAA investments over more funds, the scheme will now monitor its results with intense scrutiny before deciding at the end of the year on whether to keep the GTAA asset class.
Provisum had initially taken positions in three funds through an overall investment of 2.2% of its assets. Its overall benchmark was 4.3%, but the fund had expected returns of 10%.
Despite this setback, the scheme did, on balance, further improve its financial position last year by adding over €25m to its financial buffers, increased the total to €525m. Its cover ratio rose to 177.5%.
According to Provisum, its 2005 ALM study doesn't require hedging its interest risks, because of the size of its buffers. However, hedging three-quarters of its investments in foreign currency has positively affected its returns by 1.2%, it said.
While the overall return was a positive 3.7%, property was the best returning asset class as it delivered a yield of 15.7%. Almost two-thirds of Provisum's 15.1% holding in real estate investments was invested in direct property while the remainder was allocated to non-listed property funds.
Hedge funds yielded 7.1%, while the 40.7% fixed income and 32.8% equity allocations delivered returns of -0.6% and 1.3% respectively. The scheme invested 7.3% in hedge funds and 2% in liquid assets.
The scheme has decided to actively buy-out deferred pensions of less than €400 a year. Officials indicated approximately 25% of the participants involved have so far have accepted its offer.
At the same time, the pension fund will also buy-out small pension pots within 2-2.5 years after an employee has left, once the participant's agreement is no longer necessary, it added.
Provisum granted its 9,965 participants an indexation of over 1.6% on January 1 2008.
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