NETHERLANDS - The €10.6bn Dutch railways pension fund SPF reported returns on investments of 16.3% in 2009, after a 19.2% loss in the previous year.
The double-digit performance was attributed to both recovering equity markets and a decrease of risk-premiums on corporate bonds.
SPF’s cover ratio rose by 14 percentage points to 135% in 2009, although this is still below its pre-crisis financial position, which saw a cover ratio of 189% in 2007, according to its annual report.
With a yield of 35.8%, equity was SPF’s best returning asset class, it said, adding that its tactical equity portfolio even delivered 37.4%, largely due to its European and emerging markets portfolios.
In order to address market risk, the pension fund said it had decided to focus its entire strategic equity portfolio on long-term investments.
Fixed income investments returned 9.8%, after the pension fund merged its tactical and strategic portfolios “to improve the link between its fixed income holding to its liabilities”.
According to SPF, government bonds returned 5.7% - beating their benchmark by 1.2% - whereas corporate bonds yielded no less than 22%.
Emerging market debt delivered a return of 32.1%, whereas the scheme’s mortgages and commodities portfolios produced returns of 15.6% and 28% respectively.
In contrast, direct and indirect property showed negative returns of -0.7% and -3.1% respectively, with private equity also generating a negative yield of -0.4%.
Its improved financial position allowed the Stichting Spoorwegpensioenfonds to grant its participants a full indexation of 2.07% on 1 January, after only being able to grant 60% of the salary index last year.
The pension fund said it has increased the hedge of the interest risk on its liabilities to 60%, largely through a portfolio of long-term European governments’ bonds and interest swaps.
In addition, it has decided to tackle liquidity risk by converting a large part of its portfolio into liquid assets, such as equity and fixed income investments.
SPF also announced it will focus on increasing its own expertise - through permanent education of its board members - in the process of improving pension fund governance.
As part of its responsible investment policy, SPF said it consciously includes investments in Annona Sustainable Investment Startup Fund, Mali Biocarburant SA, micro credits and in a climate-awareness bond, adding that it deliberately does not invest in hedge funds, collateralised debt obligations or sub-prime mortgages.
The annual report further revealed that SPF received €530,000 in compensation from 20 different class action cases.