NETHERLANDS - The €13bn pension fund of electronics giant saw its investments yielding nothing in 2008 while other schemes struggled with losses of at least a fifth, but it did so largely thanks to a 17% return on fixed income holdings.
Officials attributed the scheme’s relatively healthy 2008 closing position to its risk-averse policy, as two-thirds of its assets were placed in a conservatively-managed portfolio of mainly fixed income investments, as well as an almost 100% hedge of its interest risks.
It is partly thanks to this hedge that the liability-matching portfolio returned approximately 17%, which made up for the remaining assets in an alpha strategy portfolio - consisting of 55% in equities - as it yielded a negative return of 30%, according to Jasper Kemme, chief executive of the pension fund.
That said, Rob Schreur, the scheme’s chief investment officer, estimated the liability-matching portfolio now contains approximately three-quarters of the scheme’s total assets because of the drop in the value of equities last year.
By the end of 2008, the Stichting Philips pensioenfonds’ cover ratio was 120%, thought its required funding ratio is only 109%, based on its investment risks, said Kemme.
Its financial position has allowed the scheme to grant its participants a full indexation for 2009, so its workers will receive 3.5% based on the company’s salary index while pensioners and deferred members can expect consumer index-related inflation compensation of 1.45%.
The scheme granted indexation of 3.5% and 1.9% respectively for 2008.
Kemme said the sponsoring company’s contribution for 2009 is likely to be €180m while, in line with the current collective labour agreement (CAO), employees are exempt from paying premiums until 2010.
The Philips pension fund has almost 122,000 participants, of whom 20,000 are active and 60,000 are pensioners.
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