Shell’s €26bn pension fund in the Netherlands, addressing concerns over low bond-market transaction liquidity and a sudden change in market sentiment, last year cut its equity allocation by 10 percentage points to 26%.

In its 2015 annual report, the scheme’s chairman, Garmt Louw, said he was worried about central banks’ “experimental” policies, as well as China’s economic slowdown.

The pension fund, after lowering its risk profile, saw its required funding level drop from 128% to 124%.

Its coverage ratio stood at 123% at the end of last year.

The pension fund said it temporarily reinvested the assets in short-term government bonds, which are to be replaced with fixed income instruments with a longer duration at a later stage.

In the meantime, it has increased exposure to a “more offensive” sustainable growth strategy within its equity portfolio, by 5% to 35%.

It said the strategy focused on investments in larger companies expected to grow consistently over the long term.

Last year, equity investments generated 7.2%, with Europe and the Pacific Rim delivering the best results.

The pension fund cited its strategic allocation to low-volatility equity, “combined with a defensive, stable, dividend income strategy”.

The scheme reported a net return of 4.4%.

Indirect real estate, returning nearly 13%, was the best-performing asset class.

Fixed income holdings, due to depreciating local currencies in emerging markets, returned 0.9%.

The pension fund said falling oil prices had dampened returns on its high-yield credit portfolio, and that it had re-allocated part of its credit holdings to “disintermediation assets”, responding to banks’ withdrawal from traditional roles such as mortgages lending.

According to the 2015 annual report, it increased its allocation to residential mortgages by €250m.

The scheme’s private equity holdings returned 4.9%, short of the benchmark’s 16.5% return over the same period.

The board attributed this underperformance to the “large difference” between its actual portfolio and the available benchmark due to “a ‘vintage year’ effect”.

Hedge fund holdings returned 0.9%, an outperformance of 0.6 percentage points.

The Shell pension fund granted a conditional indexation of 0.2% last year, as well as an additional 0.1% on 1 February 2016.