The €1.4bn Nedlloyd Pensioenfonds attributed investment underperformance to its equity benchmark not sufficiently reflecting its holdings.
In its annual report for 2016, Frans Dooren, the scheme’s director, put the 2.8% underperformance of equity down to the equity rally in the wake of the election of Donald Trump.
The scheme predominantly invested in high quality equity, Dooren told IPE, but companies with weaker balance sheets rose at the time. “This drove up the benchmark,” he said.
The pension fund’s equity portfolio returned 8.1%. The overall net return for the whole portfolio was 7.5%.
Dooren said that the scheme’s equity allocation had outperformed its benchmark by 1.1% on average during the past five years.
US and emerging market equity generated 12.5% and 13%, respectively, during 2016. Indirect non-listed equity delivered 11.3%, an outperformance of 3 percentage points, the scheme said.
Private equity returned 3.8%.
Government bonds – deployed to match cashflows and to hedge interest risk – yielded 8.1%.
In 2015, the Nedlloyd Pensioenfonds sold its swaptions, “as they were not effective any longer”.
Under the scheme’s dynamic hedging policy, its interest cover was 50% at year-end.
The board said it had decided against taking out an inflation hedge, following an asset-liability management study that showed only one scenario in which participants would benefit. All other scenarios would have increased the risks for the short term, it added.
Last year, the Nedlloyd scheme divested its €7m allocation to residential mortgage loans. According to Dooren, the divestment involved an old portfolio comprising 180 individual loans, “which was illiquid and was causing a lot of administrative bother”.
He said that the pension fund didn’t have any concrete plans yet to invest in mortgage funds.
In its annual report, the Nedlloyd Pensioenfonds reiterated that it saw no reason to give up its status as an independent scheme, but said that it would regularly evaluate the quality of its board and pensions provision as well as its scale.
It has already started joined knowledge-sharing sessions with similar-sized pension funds to drive down costs. Dooren said it was also looking for other possibilities for co-operation with other schemes.
The Nedlloyd Pensioenfonds said it spent 0.69% on asset management and an additional 0.2% on transactions. It posted administration costs of €290 per participant.
The pension fund has 465 active participants, 3,115 deferred members and 7,290 pensioners. At June-end, its funding stood at 118.5%.