NETHERLANDS - The €11.5bn railways pension fund SPF has reduced the number of companies in its strategic equity portfolio to 70 high performers after a policy change aimed at "quality, simplicity and survey-ability".

In the wake of the financial crisis, it has raised its equity allocation to emerging markets from 20% to 30% and has specifically allocated €100m to Indian equity, according to its 2010 annual report.

Pension fund officials said India's large increase of labour potential and the growth of the middle class had made the country an "attractive investment option", adding that SPF also expected to gain knowledge and experience from investments in the subcontinent and other emerging markets.

The railways scheme said it had divested its listed property holdings, as their characteristics are becoming "too similar" to those of equities. It added that it would terminate its international private property portfolio because it posed "too high a risk".

Instead, SPF will limit its property investments to Dutch direct property as a "stabilising factor".

However, it noted that it had tightened the screening - using an independent expert - on counterparties to prevent fraud.

The pension fund reported a return of 11.1%, but saw its coverage ratio drop from 135% to 126%, mainly due to falling long-term interest rates, as well as rising longevity.

SPF's equity holdings returned 16.9%, while property and private equity generated 5.2% and 22.3%, respectively.

Following the board's decision to take countries' paying capacity as the new benchmark for government bonds, it said it had reduced its holdings in the PIIGS countries from 45% to 32%. The disappointing 0.4% return on its fixed income portfolio had been affected by the yields of some of these countries, according to SPF, adding that credits and emerging markets debt delivered 4.8% and 13.7%, respectively.

After granting an indexation of more than 2% for 2010, the SPF board decided to replace the conditional indexation following the salary index with an indexation based on the financial position of the scheme, allowing the scheme to better adapt to changing conditions.

The SPF has granted a 0.5% indexation for 2011.

The Spoorwegpensioenfonds has a collective defined contribution pension plan, with a fixed premium of 20%.

It said its costs were €99 per participant, compared with €124 on average of similar-sized schemes monitored by international benchmarking firm CEM.

SPF has 29,170 active participants, 25,355 pensioners and 17,035 deferred members.