NETHERLANDS - The €19.2bn Dutch pension fund of oil giant Royal Dutch Shell beat its internal benchmark by 0.1% and achieved overall returns of 5.9% during 2007, despite the impact of the credit crisis.
The scheme's coverage ratio increased by 15% to 180% at the end of 2007 as a result, the pension fund said in its preliminary annual figures.
The scheme's equity portfolio - mainly consisting of small cap and value shares - returned 7.5%, while emerging markets and Asian equities - excluding Japan - yielded 36% and 22% respectively.
Among the larger equity markets, Japan performed worst for Shell and generated a negative return of -10%, it added.
"The rising long interest rates, combined with an increased risk aversion because of the credit crisis, resulted in a negative yield on the fixed interest portfolio of -3.2%, including negative results on interest swaps," the Shell scheme reported.
The best returning fixed interest categories were attached to EU members which have yet to joined the euro, as assets in this space produced a 15% return while emerging markets debt delivered a 6% return. In contrast, corporate bonds had a negative yield of -3%.
Alternative investments, largely held in private equity, also returned 34.6% on assets, which was particularly beneficial as the scheme revealed investments in this asset class have increased to 7%.
According to the scheme, its hedge funds portfolio yielded 6.9% but this asset class focuses on less risky strategies, the scheme pointed out.
Shell Pensioenfonds fully hedges the currency risks of the main currencies, so
the duration mismatch on its balance sheet is partly covered, explained the fund.
The scheme granted an indexation of 1.6% in July and as of 1 January 2008, all employees pay a pension contribution of 2%, while Shell contributes 5%.
The employer's contribution has been decreased by 12% as a result of the scheme's strong financial position, the pension fund made clear.
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