NETHERLANDS - The €13.4bn pension fund of electronics giant Philips saw its investments in high-yield bonds return almost 50% last year, contributing to its overall return of approximately 7%.

“We just benefited from a rising market in high-yield bonds, with falling spreads leading to increased returns,” said Rob Schreur, CIO of the Philips schemes.

Equity investments also performed well, according to the preliminary results, as its 17% holding returned approximately 30%, Schreur said.

He linked the overall returns to the scheme’s conservative investment strategy, to match its relatively large number of pensioners.

The pension fund has therefore placed 70% of its assets into a fixed income-based liability-matching portfolio, aimed at stable returns.

The liability-matching portfolio outperformed its benchmark by 1.5% and delivered a return of approximately 4%, largely thanks to active management of government bonds, according to the CIO.

The remaining 30% of the scheme’s assets - held mainly in equity, real estate, hedge funds and commodities - in a returns portfolio designed to actively create opportunities for indexation - delivered almost 21%, Schreur added.

“Although we frequently made evaluations last year, we have only slightly altered our asset mix and investment strategy as we found our existing exposure offered the best match to the profile of our scheme,” he said.

According to Schreur, the pension fund had yet to finalised the arrangements for its intended investments in international non-listed indirect property, after its decision to pull out of the Dutch real estate market.

The Stichting Philips Pensioenfonds saw its cover ratio rise to 127% by the end of 2009, albeit the board still needs to decide how it should take into account increased longevity expectations. The required cover ratio of the Philips scheme is 107%.

At the end of 2009, the pension fund had almost 110,800 participants, of whom 17,875 were active members, 60,165 were pensioners and 32,740 were deferred participants.

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