NETHERLANDS - The €13bn pension fund electronics giant Philips has considerably increased its allocation to alternatives, in order to better cope with the changed market conditions.
The scheme has recently more than doubled its alternative investments to 30% of its return portfolio, which contains approximately one-third of its total assets, said Rob Schreur, chief investment officer.
The increase in alternatives - commodities, emerging markets debt, hedge funds and private equity - happened at the expense of the allocations to equity and property within the return portfolio, Schreur said.
The Philips pension fund reported a negative return of -2.4% during the second quarter. However, thanks to a rise in fixed income interest rates, its cover ratio rose by 2% to 133%.
At the end of 2007, the scheme's funding ratio was 137% but since then, the pension fund the vaue of its assets fall by €800m.
The return portfolio - designed to maintain a long-term indexation - generated a negative yield of -0.3% during the second quarter, albeit this beat the benchmark by 0.6%, and this result was mainly thanks to outperformance within the equity portfolio, Schreur.
The liability-matching portfolio, which focuses on managing interest risks, also had a negative return of -3.6%, though this matched the performance of the benchmark, said officials.
In other developments at Philips, the investigation by law firm De Brauw into the large-scale fraud of the pension funds' property subsidiary PREIM is still ongoing but and will probably be concluded next winter, according to spokesman Eric Drent.
Philips Pensioenfonds is understood to havestaked a claim worth up to €150m on the property of two former directors of PREIM, who had been arrested as part of the judicial investigation into the fraud.
That said, Drent declined to elaborate on the estimated damage of the property fraud as the court case is expected to start next year, he indicated.
"We will do all we can to reclaim what has illegally been taken from us, because we consider this as theft," the spokesman stressed.
At the end of June, the pension fund had 20,065 active participants, 60,165 pensioners and 32,840 deferred participants. During the second quarter, the scheme has bought-out approximately 950 small pension claims to a maximum benefit of €400 a year.
The scheme bought-out a further 8,000 deferred participants with small pension entitlements earlier this year.
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