The €25.5bn pension fund of Dutch banking group Rabobank has slashed its equity holdings by almost 5 percentage points in favour of government bonds and credit.
In its annual report, it indicated that its decision had been triggered by the growth of its equity portfolio, which yielded 9.2% last year.
It reduced its equity exposure to 38.2% at the end of 2017.
Emerging markets in particular performed well, the scheme said, with asset manager Fidelity outperforming its benchmark by almost 6.7% while focusing on quality and growth.
In contrast, low-volatility manager Quoniam performed worst, it said.
The pension fund credited its currency hedge for contributing 3.1 percentage points to its overall gain of 7.5%.
Rabobank’s 40.4% fixed income allocation gained 0.2% overall, largely due to its credit holdings, which benefited from a reduced risk premium as a result of improved economic conditions, as well as the ECB’s quantitative easing programme.
With a yield of 8.6%, infrastructure had performed well for the fifth consecutive year, according to the Rabobank Pensioenfonds.
It cited “enthusiasm among governments embracing new projects” as well as the development of data sets and benchmarks.
Rabobank has targeted a 2.5% allocation to infrastructure, which it expects to achieve by 2020.
The scheme attributed the 0.2% profit from its private equity holdings predominantly to the J-curve effect of the portfolio, which is still under construction, as well as the currency effects of the US dollar.
Commodities and high yield credit returned 5.9% and 6.2%, respectively.
The annual report showed that residential property had significantly contributed to the 8.7% gain on the scheme’s overall property portfolio, which made up 10% of its total assets. Portfolios managed by Syntrus Achmea Real Estate & Finance and Bouwinvest Residential Fund delivered 19.5% and 15.6%, respectively.
It added that it wanted to make 15% of its residential property energy-neutral by 2030.
The Rabobank scheme also reported that it had divested its Dutch office and retail holdings, and that it was planning to gradually sell out of its international funds.
The pension fund said its sponsoring employer had made an additional contribution of €160m to guarantee that annual pensions accrual could be maintained at 2%, as a consequence of an agreement with the trade unions when it switched to collective defined contribution arrangements in 2013.
It granted its participants a 0.2% indexation last month. At June-end, its coverage ratio stood at 117.7%.
Last year, the scheme saw a sharp decrease of the number of active members, which dropped by 4,600 to 27,924 in the wake of reshuffles within the business.
As a result of the falling number of contributing employees, administration costs rose from €236 to €241 per participant and the number of pensioners’ representatives on the board and the accountability body had increased relative to workers’ delegates, the scheme said.