NETHERLANDS - The €7.4bn pension fund for doctors (SPH) has shifted its 38% government bond allocation to the “safe” countries of Germany and the Netherlands, as well as Australia and Canada, according to its annual report.

It has also temporarily maintained the cash overweight in its 33% equity allocation through derivatives to protect its coverage ratio - 132% at the end of 2011 - against a possible escalation of the euro-zone crisis.

The scheme reported a return of 4.2% for the year, due largely to the combined hedge of the risks on interest, currency, inflation and equity. Returns on investment contributed 0.9 percentage points.

SPH’s fixed income investments returned 11.2%, underperforming the benchmark by 0.7%.

The pension fund attributed the underperformance to “disappointing” results at one of its largest external managers.

The equity portfolio lost 8.6%, with investments in the US and Japan delivering the best and worst results, respectively.

SPH’s infrastructure investments returned 7.9% - against a benchmark return of 3% - while non-listed property returned 7.4%.

Following an asset-liability management study, the scheme’s board decided to decrease the 12.5% property allocation in its strategic asset mix and fully divest its 2.5% private equity portfolio, in favour of infrastructure and listed equity.

Further, in light of economic developments in 2011, the scheme decided to reduce the 5% allocation to inflation-linked bonds to 3%, in favour of government bonds.

SPH said it was continually monitoring the external parties managing the bulk of its assets, and that it was able to make portfolio changes during the year.

“Through actively taking positions,” it said, “we try to benefit from the market differences - between regions, for example.”

Last year, SPH and its provider DPFS entered into a strategic cooperation with Dutch asset manager PGGM, enabling DPFS to exploit PGGM’s knowledge and expertise.

In addition, both providers agreed to jointly present themselves towards new clients.

SPH said DPFS had transferred the management of illiquid portfolios of non-listed property, infrastructure and private equity to PGGM due to their “required specialist approach”.

The occupational pension fund has 16,860 participants, of which 9,970 are active members and 5,700 are pensioners.

SPH’s coverage ratio was 128.4% at June-end.