Interest rate hedge limits TNO’s loss

Related images

  • Interest rate hedge limits TNO’s loss

NETHERLANDS - The TNO pension fund's investments yielded a negative return of almost 5% in 2008, despite adopting a high interest rate hedge.

Although the fourth quarter's results of the Stichting Pensioenfonds TNO were 0.34%, its returns over the full year 2008 were -4.94%, reported the pension scheme for the institute for applied scientific research.

The pension fund's 75% interest hedge applied during the second half of the year - raised from 50% - prevented an additional loss of 9%, officials pointed out.

At the same time, the strategic allocation to equity was decreased by 5% following an earlier allocation decrease of 4% in 2007.

Joop Ruijgrok, the scheme's director, said the divested assets have been reallocated to fixed income, which now account for 42% of the portfolio.

The fund's strategic allocation to listed equity is 25% at present, he told IPE, though said its allocation to other asset classes has little changed.

The pension fund also had an 11.9% allocation to property in 2007, along with 8.2% in private equity, 5.9% in fund-of-hedge funds and 4.8% in cash.

The TNO pension fund had a cover ratio of 103.2% by the end of 2008, down from 134% a year earlier.

The scheme's board said it has decided not to grant any indexation for 2009, given the fund's financial position.

Pension fund contribution have also been raised from 15% to 17.5% of salary, including a 1% premium for the employer, who pays approximately two-thirds of the contribution.

The TNO pension fund granted its participants an indexation of 3.2% at the beginning of 2008, following returns of 2% in 2007.

The scheme's assets totalled €1.8bn at the end of November, which was down from over  €2.1bn at the end of 2007, and had 5,555 active participants, 4,800 deferred members and 4,245 pensioners at the end of 2007.

Have your say

You must sign in to make a comment


Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2503

    Asset class: Equities.
    Asset region: Emerging Markets.
    Size: EUR 30m.
    Closing date: 2019-01-31.

  • QN-2505

    Asset class: Real Estate Core/Core-Plus Multi-sector strategy.
    Asset region: Asia-Pacific.
    Size: $ 50m.
    Closing date: 2019-01-28.

Begin Your Search Here