NETHERLANDS - The €3.1bn pension plan of IBM Netherlands managed to achieve an overall return of 4.5% thanks to its currency hedge against the US dollar.

Without the hedge, the scheme's return would have been merely 0.9%, it said in its annual report.

The scheme had fully hedged the currency risks of its fixed income investments, while a hedge also applied to 62.5% of its equity portfolio.

Equity is hedged through an overlay program and is aimed at extra returns through actively taking positions.

The Stichting Pensioenfonds IBM Nederland declined to disclose the returns of its individual asset classes, fixed income and equity, ‘as a matter of policy', according to Rinus Verloop, deputy executive.

However, the report showed the combined equity and fixed income investments in emerging markets returned 25.3% and the scheme's cover ratio was 152.1% at year-end.

As a result of an ALM study, the IBM scheme has decided to change its strategic asset mix and reduce its equity allocation by 10% to 55%, while increasing its fixed income by a similar percentage to 45%.

In addition, IBM Netherlands has also extended the duration of its investment portfolio, in order to increase the match with its liabilities.

The pension fund is changing the benchmark of its equity portfolio from regional indices to MSCI Worldwide, the annual report revealed.

IBM's scheme has fully contracted-out its asset management in both passive and active mandates.

Active mandates are placed in exclusive IBM pools by the appointed firms for both global fixed income and equity as well as emerging markets equity, it added.

The annual report also revealed the scheme has started contracting-out the investment activities of its defined contribution plan.

As part of this process, IBM has limited the choice of individual investment options from six to three, "following new legislation on duty of care".

The pension fund has introduced a one-tier board last year by merging the executive and the risk manager with its board of governors.

The Pensioenfonds IBM Nederland has now granted its 4,630 active participants, 6,165 deferred members and 4,320 pensioners an indexation of 0.79%.

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