NETHERLANDS - The €4.2bn pension fund for medical consultants SPMS returned -16.2% on investments in 2008 and saw its cover ratio drop from 146% to 98%.

With a return of 4.9%, the occupational scheme's 39% fixed income investments were the only positively yielding asset class last year, according to its annual report, noting that its considerable allocation to corporate bonds also contributed negatively, because of the high premiums for default risk.

SPMS' 31.4% equity allocation and its 13.3% property investments yielded -39.3% and -19.4% respectively.

Further losses were made on the pension fund's 8.8% alpha mandate of 14.6%, along with a 32.5% loss on its 2% commodities investments  and a -26.5% return on 0.3% private equity portfolio, the annual report revealed.

Officials said the 50% interest hedge on liabilities through swaps contributed 3.6% to the scheme's absolute returns.

In contrast, SPMS' strategic currency hedge caused a 1.3% loss, which the scheme attributed to the depreciation of the euro against the US dollar and the Japanese yen.

The scheme said it barely changed its strategic asset mix in 2008, but incurred relatively high costs in its yearly rebalancing of the portfolio in November 2008 because of the large adjustments needed following significant market movements.

At the end of last year, SPMS' board decided to limit the programme of securities lending to the current level of approximately €500m, after a loss of €1.7m, though Jeroen Steenvoorden, director of SPMS, said there will be a review of the policy on securities lending.

Although the pension fund expects to recover its funding ratio to the legally required 105% within five years, it would consider cutting benefits and claims as a real option should market conditions deteriorate further than that experienced last year.

However, it will refrain from indexation as a first emergency measure, the scheme added. That said, based on the situation last September, it decided to grant its participants the ‘guaranteed' 3% increase of their pension rights on 1 January 2009.

According to Steenvoorden, the cover ratio has since risen to 104.4%, which includes the yearly 3% indexation.

SPMS manages the pension scheme for the occupational pension society of medical consultants BPMS. Its pension provider is Doctors Pension Fund Services (DFPS).

The scheme has 13,790 participants in total.

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