IBM pension fund to stick with downgraded AAA bonds
NETHERLANDS - IBM's €3.1bn pension fund in the Netherlands has said it will stand by its investments in government bonds that have been downgraded from AAA to AA.
The fund - known as SPIN - said it wanted to "maintain a balance" between safety and spreading its investments.
It said the downgrading of French government bonds by ratings agency Standard and Poor's in January had triggered a review of its policy.
By sticking with French bonds, the scheme said it hoped to maintain a "proper spread of investments" within the euro-zone.
However, SPIN also made clear that it had no plans to add new investments in AA countries to its portfolio.
"We will only keep investing if a AAA country in our portfolio is downgraded," it said.
SPIN has invested in the government bonds of Germany, the Netherlands, France, Austria and Finland.
The fund is currently one of the best-performing schemes in the Netherlands, with a coverage ratio of 121% as at the end of January.
At the end of 2010, the scheme increased its strategic fixed income portfolio from 50% to 70% after having divested its Portuguese, Irish, Italian, Greek and Spanish government bonds earlier in the year.
It also decided to hedge the interest risk on its nominal liabilities, as well as inflation risk through inflation swaps if its funding exceeds 130%.
In 2010, SPIN returned 12.4% on investments, with the interest hedge contributing more than 3 percentage points to the result.
Since it was established in 1996, IBM's pension fund has returned 6.9% on average.