PGB, the €19.3bn pension fund for the Dutch printing industry, has said a 30.7% return on its government bond holdings was the main contributor to its 18.3% overall return for 2014. 

As part of its preliminary figures, the scheme also reported a 20% annual return on its portfolio of alternative fixed income investments.

Equity, infrastructure and property generated 15.9%, 13.6% and 5.6%, while credit delivered 7.4%, PGB said.

It added that inflation-linked bonds (-1.2%) was the only loss-making asset class.

PGB’s matching portfolio consists of 32% euro-denominated government bonds and 17.5% credit.

The industry-wide scheme announced that it would gradually increase its current allocation to equity (30%) and alternatives (20%) to 55% combined this year.

It said the decision was based on a survey into the risk-preparedness of its participants, as well as an asset-liability management study, which concluded that its investment mix could be improved.

Rob Heerkens, a board member of the pension fund, said: “The ALM made clear that the new mix could achieve purchasing power for our participants of at least 90% by 2030.”

He said that, given the scheme’s financial position and the rules of the new financial assessment framework (FTK), the indexation options would not be sufficient to keep up with inflation over the next 15 years.

PGB also said it would gradually reduce the interest hedge on its liabilities from 50% to 45% over 2015.

“We assume that larger interest movements, in particular during economic recovery in the mid term, are most likely to go up, as there is more upward margin,” Heerkens said. “The interest risk is becoming more and more asymmetric.” 

PGB closed the year 2014 with a funding ratio of 104.8%, which was, according to its board, insufficient for granting any indexation.

Last year, PGB’s total number of participants and pensioners rose by 16,655 to 250,000.

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