NETHERLANDS- Dutch telecoms pension fund KPN has cut its equity investments substantially for the second time this year in a move that takes its holding in the asset class below 30%, down from 56% at the end of 2001.

Last year coverage levels at the e3bn fund dropped to 125% and in January the board decided to cut equity investment from a total of 56% to 46% and to put the proceeds into fixed income in an attempt to stem the fall.

Hans Hokke, managing director of TKP, the company managing the scheme, says the trustees had set up a contingency plan to switch between equities and fixed income.

“What we said was that if stock markets suffered a third year of negative returns then perhaps it would be sensible to come up with some contingency plan where would decide in advance what to do on reaching a certain coverage level.

“We planed to cut the fund’s equity investments further if coverage fell below 110%. This happened at the end of June so we reduced our equities a further 15%,” he says.

Falling equity prices have helped to draw down coverage levels further and following the readjustment and market fluctuations the fund has around 60% in fixed income, 12% in real estate and 28% in equities.

Hokke says they are likely to move back into the market at some stage but that since coverage remains below 110% it is unlikely to be in the foreseeable future.

KPN sold across a spectrum of equities opposed to targeting specific sectors or regions. “So far the policy has turned out to be successful for the fund,” says Hokke

Last year in the UK the e3.7bn pension fund of retailers Boots sold its entire equity and short term bond investments in favour of sterling long-dated fixed rate bonds in a shift it maintained would save £10m per annum in management fees.