NETHERLANDS - The €2.5bn pension fund of industrial conglomerate Stork saw an negative return of -0.3% on investments in 2007 - 1% short of its benchmark.
However, the scheme cover ratio increased by 2% to 124% thanks to the rising interest rates, the scheme said in its annual report.
This means the funding ratio is 3% above the required minimum financial buffer set by pensions regulator De Nederlandsche Bank.
Alternatives were the best returning asset class with a return of 4.4%, followed by property which yielded 3.3%, the scheme reported. Its strategic allocation to these asset classes is 7% and 15% respectively.
Pensioenfonds Stork has now completed the divestment of its direct property, in favour of European indirect real estate, and added a 0.5% allocation of its property portfolio to European infrastructure in 2007, as a diversifier.
The Stork scheme's equity allocation of 35% generated a negative return of -0.8%, partly caused by negative investment returns of -13.5% in Japanese holdings.
That said, equity invested in other Asian countries and emerging markets yielded 19% and 26% respectively, according to the scheme.
Fixed income investments - accounting for 43% of the scheme's total assets - also saw a negative return of -1.6%.
A currency hedge covered 90% of the scheme's strategic equity positions in US dollars against the euro, which contributed positively to the total results, according to the pension fund.
In order the decrease the susceptibility of the funding ratio to interest rate movements, the Stork scheme has partly hedged its interest risk through a portfolio of interest rate swaps. However, interest rate rises have negatively affected this portfolio, according to officials.
Without any hedge, the scheme's overall return would have been further in negative territory of -0.4%, CEO Gerard Rutten told IPE.
Pensioenfonds Stork has granted an indexation of 4.29% to its 10,151 active participants as of 1 January 2008. The pension entitlement of its 26,420 deferred members and 14,950 pensioners has been raised by 1.29%.
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