KLM scheme establishes SRI pool and de-risks
NETHERLANDS - The €1.4bn KLM pension fund for cabin staff has set up a ‘green pool' within its investment portfolio as it develops its socially responsible investment programme (SRI).
Ten percent of the pension fund's equity portfolio, which represents 45% of assets under management, has been invested in sustainable activities, such as alternative energy, water and microfinance.
Peter Bajema, fixed income strategist at Blue Sky Group, asset manager for Stichting Pensioenfonds voor Cabinepersoneel, said this was the first step in the pension fund's new SRI initiative.
"There are no concrete plans to increase this percentage yet, as the results of the SRI investments will be evaluated first," he told IPE.
The pension fund has also taken measures to lower the risk profile of its investment portfolio, including an increase to the interest rate hedge on its liabilities, from 30% to 50%, through interest rate swaps.
The fund has decided to cover 50% of its equity risk through put options, according to Bajema.
According to its latest quarterly report, the KLM scheme reported a return on investments of 3.8% during the first three months of 2010, taking its nominal cover ratio to 127.1%.
Despite this, its funding ratio decreased by over seven percentage points during the first quarter, as the pension fund factored in higher mortality expectations.
The scheme's legally required financial reserves - based on its risk-ratio profile - equated to a cover ratio of 123.6%, while its real cover ratio, which takes future inflation into account, is 72.3%.