NETHERLANDS - The €2.9bn Dutch pension fund of IT giant IBM managed to keep its coverage ratio at 123.1% at year-end, mainly due to a €277m additional contribution from its sponsoring company.

Its 9.4% return on investments, as well its decision not to grant any indexation, also contributed to its relatively comfortable financial position at the end of 2009, according to its annual report.

IBM's scheme - also known as SPIN - has further reduced its equity holding and investments in worldwide fixed income funds, favouring listed property, corporate bonds and inflation-linked bonds (ILBs).

However, officials noted the scheme had excluded ILBs from countries such as Greece and Italy.

In addition, pension fund officials have begun a thorough evaluation of the scheme's overall investment policy, focusing in real liabilities.

Pending the outcome, officials made clear SPIN would stick to its present asset mix of 70% fixed income and 30% securities, as well as its long-term strategic allocation of 50% fixed income, 35% equity and 15% alternatives.

Meanwhile, it has already fast-tracked the scheduled implementation of a 100% duration match of its liabilities.

In 2009, SPIN also increased its long-term hedge of the interest risk on its liabilities to 100%.

That said, the scheme also decided not to implement its planned long-term cover of 120% in order to "avoid the risk of rising inflation", officials said.

The present interest hedge came at the expense of 2 percentage points of SPIN's annual return.

Its funding ratio had fallen to 121% at the end of May 2010.

The IBM scheme has outsourced its asset management to several external managers.

Its active management is being carried out through investment pools exclusively run for IBM schemes and focuses on worldwide fixed income and equity, as well as emerging market equity.

ASR Pension Fund Services and TKP handle SPIN's pension administration for defined benefit and defined contribution arrangements, respectively.
 

Topics