NETHERLANDS - The €2bn pension fund of TNO, the Dutch Institute for Applied Science, has terminated its 2.7% global tactical asset allocation (GTAA) within a year due to "disappointing" performance.
Arie van Luijk, deputy director of the scheme, said: "The mandate had been given to a quant manager, whose model turned out not to be crisis-resistant."
He said the GTAA model had aimed to take tactical positions between liquid asset classes through listed derivatives, but it lost 26% in 2008 and fell by a further 0.9% in the first quarter of 2009.
Meanwhile, the TNO scheme has also cut its allocation to hedge funds from 6% to 4% despite its 9.4% return last year.
Van Luijk said: "The disappointing results of the entire sector, as well the diversification being less than expected, were our main considerations for the decision to decrease the weighing."
TNO said it had fine-tuned its risk management by measuring and analysing risks based on a full view of its equity and fixed income portfolios, as advised by BlackRock, its risk overlay manager.
It has also commissioned Ortec Finance to provide a quarterly report on developments in relation to its recovery plan.
To further decrease its risk profile, the TNO scheme has introduced a yearly standard portfolio - derived from its strategic asset mix - that aims to increase its fixed income allocation to emerging markets and high-yield bonds, at the expense of equity holdings.
The pension fund reported returns of 12.8% during 2009, taking its cover ratio to 110% at year-end, including 4 percentage points for increased longevity, it said.
It said the strategic choice to hedge 75% of the interest risk on its liabilities had led to a stable development of its cover ratio, but also caused a loss of 3.6 percentage points of its returns.
The scheme's equity holdings returned 31.6%, while its fixed income allocation delivered 22.1%.
Inflation-linked bonds and high-yield bonds returned 44% and 50.6%, respectively, while the property portfolio fell by 23.5%.