NETHERLANDS - The €3.8bn pension fund of postal company TNT saw its losses considerably limited last year, officials claim, as the interest hedge on liabilities was increased from 53% to 75%.
The interest rate swap hedge contributed no less than 8.2% to the scheme’s eventual return of -14.2%, although it could not prevent the cover ratio dropping from 141.4% to 93%, TNT revealed in its annual report.
Its mandatory recovery efforts are now aimed at raising its funding ratio to 119.4% - equalling its minimum required financial reserves - within the next 15 years, the scheme said.
So members will not be granted indexation under the short-term recovery plan as long as the scheme’s cover ratio is less than 105%, after last year granting its 92,000 members indexation of 3%.
Looking closely at the annual report, TNT’s 37.5% equity allocation lost 41.4% on investments, whereas its 44.8% fixed income investments returned 0.8%, with government bonds returning 10.8%.
Officials indicated they will now raise the inflation-linked bonds allocation by 2% to 12% although the postal scheme will keep its strategic allocation to equity and fixed income at 42% and 40% respectively.
It has decided to increase its property allocation - largely to indirect non-listed real estate - by 0.3% to 12% and despite a loss of 48.9% on its 3.4% allocation to commodities, the scheme announced it is increasing this allocation to 5%, with a maximum of 30% to be invested in an actively-managed fund.
Meanwhile, TNT’s 2.9% investment in hedge funds, which returned -18.2% last year, will be reduced to 1%.
Officials said the fact that the scheme’s overall returns fell 2.8% short of the benchmark was largely caused by the negative performance of its alternatives, while transaction and management fees accounted for another 0.5%.
At the same time, the 2.9% allocation to global tactical asset performed negatively for the third consecutive year and lost 0.6% so the fund is now pulling out of that strategy, officials made clear.
The Stichting Pensioenfonds TNT has conditionally indexed average salary arrangements, with a contribution of 20.7% paid by the employer.
TNT’s pension provider is TKP Pensioen, and its assets are managed by TKP Investments.
If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email julie.henderson@ipe.com
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