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IPE special report May 2018

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Provisum touts active management with 4% hedge-fund outperformance

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  • Provisum touts active management with 4% hedge-fund outperformance

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NETHERLANDS – Provisum, the €1.2bn pension fund of clothing retailer C&A in the Netherlands, said its hedge fund portfolio returned nearly 6% last year, outperforming its benchmark by 3.8 percentage points thanks to active management by its 30 managers.

According to the scheme's 2012 annual report, some of those managers achieved returns of up to 37%, while two managers produced a 15% return on structured credit, including residential mortgage-backed securities.

The scheme, which reported an overall return of 9.1%, said its credit allocation returned 14.8%. The Blue Bay Global Diversified Corporate fund was the best performer, returning nearly 16%.

Provisum's 30% fixed income allocation in its matching portfolio returned 8.7%, contributing 2.9 percentage points to its overall return.

Pension fund officials also cited a position in a German government-backed loan (FMS Wertmanagement), as well as short positions in Austrian and Italian government bonds.

Fixed income investments in the scheme's return portfolio returned 8.6%, largely thanks its 45% allocation to French government paper, which delivered a 9.6% profit.

Provisum's 26.6% equity allocation returned 13.6%.

The scheme attributed a 0.5-percentage-point underperformance relative to its benchmark to underweight positions in cyclical sectors, which "unexpectedly" performed better than defensive sectors.

European financials were the scheme's best-performing investment, returning 31%.

Property investments generated 0%, due to positive results being offset by downward adjustments of valuations.

The pension fund also lost 0.9% on its commodities portfolio.

The scheme noted that its 75% currency hedge on the US dollar, the UK pound and the Japanese yen, in addition to its 60% interest cover through government paper, contributed 0.4 and 2.9 percentage points, respectively, to its overall return.

Provisum closed the accounting year with a funding of 116.6%, enabling it to grant its pensioners and deferred participants an indexation of nearly 2.9%.

During the past year, the pension fund's coverage ratio dropped by 1.1 percentage points due to falling long-term interest rates and undated life-expectancy projections.

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