NETHERLANDS - The KLM pension funds for cabin staff and flying personnel have allocated 5% of their fixed income portfolios to long-term UK corporate bonds.
These new mandates will follow a passive investment style, the schemes made clear in their annual reports.
According to both schemes - of which Blue Sky Group is provider and asset manager - the spread of fixed income portfolios changes their susceptibility to interest changes.
Moreover, because the stake of British companies with AAA ratings is relatively high, the quality of bonds held has improved too, the pension funds said.
Fixed income portfolios of the €1.2bn Stichting Pensioenfonds KLM Cabinepersoneel and the €5.6bn Stichting Pensioenfonds KLM Vliegend Personeel had negatives yeilds of -0.6% and -0.8% respectively and overall returns were 11.8% and 8.4% respectively.
A total of 38.5% of the cabin crew scheme's assets was invested in fixed income, while the flying staff's pension fund invested 51.7% of its asset in UK corporate bonds.
Both schemes also decreased their stake in US high-yields bonds in favour of European government bonds, they said.
A tactical rebalancing in the last quarter, in favour of fixed income at the expense of equity, resulted in a positive contribution, the schemes added.
Their strategic investment mix hasn't changed last year. However, both schemes are carrying out an ALM study into their policies of financing, indexation and investment, as well as the deployment of derivatives, which could lead to a change in the investment portfolio.
Property was the best returning asset class, with yields of 30.9% and 30.6% and schemes' allocations to US property and private property increased last year.
In addition, the pension funds are looking into whether they should add new investment regions to their property portfolios.
The equity portfolio of the cabin staff's scheme returned 17.9%, while the flying personnel's plan yielded 14.3% as the tactical allocation of European (ex UK) and emerging markets equities were overweight at the expense of US large caps for most of last year, according to the report.
In order to further diversify, both plans have also decided to allocate some of its equity holding to the Pacific region, excluding Japan the KLM scheme report states.
And the coverage ratio of the cabin staff's and flying personnel's schemes increased to 178% and 164% respectively last year.
Under the new financial assessment framework nFTK, a funding ratio of over 130% allows for a full indexation of pensions.