NETHERLANDS - The pension fund of electronics giant Philips returned 0.4% on its investments in the third quarter thanks to its ‘risk-aware' investment policy, officials have claimed.
The €13bn scheme's cover ratio has dropped to just 127% at the end of the third quarter, which is well above its required minimum of 109%, it reported.
The pension fund's cover ratio has decreased by 6% since the end of June on the back of developments in the financial markets and driven mainly by the falling long-term interest rates, which in turn have pushed up the scheme's pension liabilities.
Officials attribute the Philips pension fund's relative survival from the rigours of post-Lehman collapse turbulence to its ‘risk-aware' investment policy, as the strategy is focused on fixed income and fixed income-related investments in a liabilities-matching portfolio consisting of 69% of its assets.
The remaining assets were invested the scheme's return portfolio - which is actively managed and aimed at extra returns for indexation - and consists of equity, commodities and hedge funds assets.
The liability-matching portfolio returned no less than 5.2%, exceeding its benchmark by 0.8%.
On the other hand, the return portfolio exactly matched its benchmark and delivered a negative return of -8.7%, officials said.
Although he declined to specify the returns of the individual asset classes, Rob Schreur, CIO, told IPE private equity, emerging markets debt and high-yield bonds performed relatively well.
"Commodities, which we began investing in last summer, matched their benchmark, while the performance of equities and hedge funds fell short of their respective benchmarks," Schreur added.
According to the CIO, 50% of the return portfolio was allocated to equity, while 15% was invested in property.
Schreur also made it clear "a large proportion" of the scheme's interest risks were hedged during the three months to 30 September 2008.
Elsewhere, SBZ, the €2.2bn industry-wide pension fund for care insurers, reported a cover ratio of 115% last week, which was 3% up compared to the end of October. Its required minimum funding ratio is 118%.
And PDN, the €5bn company scheme of chemicals giant DSM, announced it had a cover ratio of 126% at the end of the third quarter.
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