NETHERLANDS - Equity investments in emerging countries were the best returning asset class of the €26bn pension fund for the construction industry BPF Bouw and generated returns of over 30% in 2007.
The industry-wide scheme said overall returns were 5.1% in the 12 months to Dec 31, 2007, although its interest rate swaps - designed to minimise interest risks - had a slightly negative effect on the scheme's overall performance, BPF Bouw said in its annual report.
Thanks to hedging against its most important currency exposure, the scheme also avoided the direct negative effects of the strong drop of the dollar against the euro, it added.
Property investments of the industry-wide scheme also showed satisfactory results, yielding 9%, BPF Bouw made clear.
Commodities and hedge funds contributed to the pension fund's positive results by returning 19.7% and 10.8% respectively, the scheme said.
However, the weak performance of some assets during the second half - investments in Japan in particular - resulted in a modest overall return of 1.9% of the scheme's equity portfolio, it said while BPF's fixed income portfolio yielded 1.2%.
BPF Bouw decided in November to grant its participants a full indexation of 2.52%, which left the scheme with a coverage ratio of 141% at the end of 2007.
The scheme has fully hedged its exposure to the US dollar, sterling and the yen as ts currency risks on equity and commodities are hedged through a currency overlay.
At present BPF Bouw's strategic asset allocation for fixed income, equity and alternatives is 41%, 32% and 3.5% respectively while current allocations to property and deposits are 22.5% and 2% respectively.
The pension fund intends to increase its allocation to alternatives -which include commodities, hedge funds, private equity and infrastructure - at the expense of traditional asset classes during this year, Arjan de Zeeuw, head of investments told IPE.
BPF Bouw provides the pensions of 900,000 former employees at over 20,000 companies in the construction industry. Its administration and financial asset management is contracted out to Cordares.
However, the scheme's €5.9bn of real estate investments - mainly invested in direct property but includes €1.1bn of foreign indirect property - are managed by its subsidiary company BPF Bouwinvest.
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