The €4.9bn pension fund PNO Media said that it would stop investing in infrastructure and microfinance, following an assessment of returns versus risks and costs.

Although its 2% infrastructure holdings returned 13.2% last year, its 1% microfinance portfolio yielded no more than 1.9%, under-performing the benchmark by 4.1 percentage points, it said in its annual report for 2014.

The media scheme posted an overall result of 15.9%, which was boosted by 4.5 percentage points due to its interest hedge.

However, the fund said it had lost out even higher returns, as it had reduced its hedging level from 40% to 25% in the belief that interest rates would rise in the mid-term.

As a consequence of the adjustment, its funding based on market rates fell from 105.3% to 100.1% during the year. Its new and official policy funding level – the average coverage of the previous 12 months – stood at 101.4%, it said.

Last year, the scheme’s board adjusted its strategic asset allocation by reducing the target weighting of credit (-2%), emerging market equity (-1%) and private equity (-1%) in favour of government bonds (+1%), residential mortgages (+1%) and US equity (+2%), while keeping its strategic interest hedge at 40%.

PNO Media’s 50.8% fixed income portfolio returned 15.6%, with European AAA government paper generating more than 29%.

Residential mortgages and European credit yielded 8.2% and 7.8% respectively, it said.

Equity holdings, accounting for over a third of assets, delivered returns of 14.5%, with US stocks producing a 29.5% return. That said, the scheme indicated that it could not fully benefit from the performance of US equity and the rise of the dollar against the euro, as it had hedged 75% of the currency risk.

Also mainly thanks to well-performing US markets, the pension fund’s property investments – chiefly in the residential and retail sector, through non-listed funds – returned 5.8%.

PNO Media further said that it had decided to increase its investment volume for private equity, as the pay out of maturing projects started exceeding investments. The asset class returned 14.1%

The scheme has been investing in private equity in co-operation with SPF Beheer, the asset manager of the €14bn railways scheme SPF, since 2001.

The media pension fund made clear that it was looking into the options to widening its scope of pension plans, to encourage small companies with many young staff to join the industry-wide scheme.

“We see growth potential in initially charging young workers a lower contribution than our standard average premium, which still would entitle them to a full rights accrual, because of their longer investment horizon,” explained Jeroen van der Put, director of investments at PNO Media.

The scheme also said that it had renewed its contract with its provider MPD for an indefinite period, under the condition that MPD would keep on working exclusively for PNO Media. Meanwhile, it has housed its pensions bureau with the provider.

“An exclusive relationship will enable the board to keep its focus amidst all changes in legislation and governance,” Van der Put said.

PNO Media has 15,235 active participants, 32,655 deferred members and 9,045 pensioners affiliated with 449 employers.

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