NETHERLANDS - The €3.8bn pension fund of postal company TNT saw its losses considerably limited last year, officials claim, as the interest hedge on liabilities was increased from 53% to 75%.
The interest rate swap hedge contributed no less than 8.2% to the scheme’s eventual return of -14.2%, although it could not prevent the cover ratio dropping from 141.4% to 93%, TNT revealed in its annual report.
Its mandatory recovery efforts are now aimed at raising its funding ratio to 119.4% - equalling its minimum required financial reserves - within the next 15 years, the scheme said.
So members will not be granted indexation under the short-term recovery plan as long as the scheme’s cover ratio is less than 105%, after last year granting its 92,000 members indexation of 3%.
Looking closely at the annual report, TNT’s 37.5% equity allocation lost 41.4% on investments, whereas its 44.8% fixed income investments returned 0.8%, with government bonds returning 10.8%.
Officials indicated they will now raise the inflation-linked bonds allocation by 2% to 12% although the postal scheme will keep its strategic allocation to equity and fixed income at 42% and 40% respectively.
It has decided to increase its property allocation - largely to indirect non-listed real estate - by 0.3% to 12% and despite a loss of 48.9% on its 3.4% allocation to commodities, the scheme announced it is increasing this allocation to 5%, with a maximum of 30% to be invested in an actively-managed fund.
Meanwhile, TNT’s 2.9% investment in hedge funds, which returned -18.2% last year, will be reduced to 1%.
Officials said the fact that the scheme’s overall returns fell 2.8% short of the benchmark was largely caused by the negative performance of its alternatives, while transaction and management fees accounted for another 0.5%.
At the same time, the 2.9% allocation to global tactical asset performed negatively for the third consecutive year and lost 0.6% so the fund is now pulling out of that strategy, officials made clear.
The Stichting Pensioenfonds TNT has conditionally indexed average salary arrangements, with a contribution of 20.7% paid by the employer.
TNT’s pension provider is TKP Pensioen, and its assets are managed by TKP Investments.
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