SPT, the closed pension fund for dentists and dental consultants in the Netherlands, is to adjust its investment policy to safeguard pensions over the short term and grant indexation over the long term.
In light of its low investment target and low risk tolerance, the pension fund is to shift its overall portfolio to 65% European government bonds of at least AA rating – also intended as a hedge of the interest risk on its liabilities – and 35% equities and other securities.
The €1.6bn scheme said its new return portfolio – half of which is allocated to developed market equity – must allow for an indexation of 0.85%.
But it also stressed that the new investment mix was liquid and therefore easily transferable to another pensions provider, in the event that SPT ceased to exist.
According to SPT, of its current 7,400 participants, approximately 45% have already retired.
The pension fund expects this percentage to increase to 77% over the next decade, while the number of participants will fall to 6,600.
This means the fund’s investment horizon – as well as its recovery period in times of trouble – will become increasingly shorter.
Last year, SPT had to pay €53m in pension benefits, but it predicted that, within 11 years, this amount will rise to €80m.
Until now, SPT’s investment portfolio has been 25% securities, 60% fixed income and 15% derivatives.
The pension fund said that, under its new investment policy, it will avoid “high-cost” investments, as well as asset classes with “unclear sources of return and risk”, such as hedge funds and private equity.
This also goes for investments that are illiquid or carry a possible obligation to additional payment, it said, as well as investments “without a reliable market mechanism”, such as property and infrastructure.
SPT has also excluded investment classes focusing on active currency positions.
The pension fund said its new investment policy was based on the existing financial assessment framework (FTK) from 2007, noting that a new FTK could trigger further changes.