The €5bn pension fund PNO Media has lowered its risk profile by reducing its strategic allocation to equity by 3 percentage points.

The scheme has also reduced exposure to infrastructure, microfinance, local-currency-denominated emerging market debt, as well as European credit.

In its 2015 annual report, it said it reinvested the assets by introducing a 5% allocation to US high-yield bonds and raising its property allocation from 9% to 11%.

The media scheme said it maintained its interest hedge at 25% of its liabilities.

The pension fund reported a net result of 3.5% after losses on its interest hedge (-0.3%) and currency cover (-2.6%).

It said its 37% equity allocation returned 10.3%, outperforming its benchmark by 2.1 percentage points, due chiefly to its core portfolio of large international companies in Europe and the US.

It noted that European small caps, with a return of 22.8%, performed much better than large caps over the period.

The pension fund attributed the 0.8% return on its 48% fixed income allocation to the performance of mortgages (3.7%) and dollar-denominated emerging market debt (14.8%).

It lost 5.5% and 3.7% on emerging market debt (local currency) and microfinance, respectively, and also posted negative results on government bonds (-1.2%) and European credit (-1%).

PNO Media’s investments in non-listed property funds generated 11.1%.

It said its investments in US real estate not only performed better than its European holdings but also benefited from the dollar’s appreciation against the euro.

Private equity, returning 22.8%, was PNO Media’s the best returning asset class.

The pension fund said it co-operated with railways scheme SPF on private equity, following a strategy of active value creation.

Infrastructure holdings, which focused on Europe through non-listed multi-sector funds, delivered 16.2%.

PNO Media saw its funding drop to 90.4% at March-end and said rights cuts would be necessary if its financial position failed to improve before year-end.

It added that the indexation in arrears had increased to 14.6% and that making up for previous rights cuts was likely to be impossible.