ABN AMRO scheme recovers from funding and reserves shortfalls
NETHERLANDS - The €9.3bn pension fund of ABN AMRO recovered from a shortfall of its funding and financial reserves due to a 5.8% return on investments, as well as recovering equity markets and rising interest rates last year.
It saw its nominal cover ratio rise to 116% - 3 percentage points above its required funding - after an absolute low of 103% at end-February, according to its annual report for 2009.
The scheme indicated it was continuing with its "dynamic investment policy" for securities, which led to a rise of its equity holdings from 14% to 47% at year-end.
With a yield of 33.5%, equity was the best-performing asset class and the main contributor to the overall return of 26.4%.
The return portfolio is aimed at creating addition returns for indexation and consists of almost 30% of the scheme's assets.
In contrast, its 70% liability-matching portfolio produced a loss of 1.1%.
Officials emphasised that the pension fund had removed commodities - which returned 12.4% and had been managed under a passive mandate - from the return portfolio, as a "structural long position doesn't generate sufficient risk premium".
The scheme has shifted the corporate bond holdings from the matching portfolio to the return portfolio instead, officials said.
The pension fund also said it had terminated the active management of its equity portfolio for developing markets, as well as the active currency management, as the latter failed to generate sufficient additional returns.
The passive equity mandate, which has increased as a result, has been spread over more than one asset manager, it added.
The scheme said it kept its hedge of the interest risk on liabilities at 85%, while hedging 96% of its currency risk.
It said it had hedged the currency risk in its equity portfolio through an overlay, but noted it had not covered the currency risk of emerging markets.
The Stichting Pensioenfonds ABN AMRO Bank has 22,510 active participants, 39,100 deferred members and 17,665 pensioners.