NETHERLANDS - The Dutch pension fund of energy giant Shell pulled back a major recovery on its investments last year and delivered a 26% return on assets.

With the addition of a €2bn contribution from the sponsoring company, the pension fund's assets rose by over 50% to €15bn by the end of 2009, according to officials.

The scheme's cover ratio rose to 121% by the end of 2009 on the back of its recovery, after hitting a low of 80% in 2008.

In order to improve asset management and risk management, the pension fund said it has decided to restructure its own organisation into a management bureau with external investment experts, to give wider board support.

It has also tightened the guidelines on investment portfolios managed by Shell's asset management company SAMCo and has extended its requirements for reporting, through a new risk measurement system applied across the entire investment portfolio.

A new investment committee, which will include an external adviser, will in future scrutinise all proposals and reports from SAMCo before they are put to the board.

"Although most expertise is at SAMCo, the board has the final responsibility on investment policy," commented Bjorn Fermin, the chairman of the investment committee, who noted pensions regulator De Nederlandsche Bank requires pension funds to improve their processes and expertise on investments.

At the same time, the Shell pension fund has now appointed Garmt Louw as successor to chairman Kees Linse, who left the company earlier this year.

Louw has worked at Shell since 1977, though mainly in human resources roles aside from a stint between 2002 and 2004 at ABN Amro, where he was also employed as chairman of its €9bn pension fund.

The Stichting Pensioenfonds Shell saw its assets drop by over 43% in 2008, largely as a result of a 56.7% loss on its 70% equity allocation and through a decrease in the value of its relatively large fixed income allocation to emerging markets and corporate bonds.

The scheme shifted 20% of its equity investments to its fixed income allocation in 2008 in a response to the developments in the financial markets and has since created a new alternatives portfolio worth 5% of its total assets.

Officials said the team and structural adjustments were made ahead of the scheme's new strategic benchmark of 35% fixed income, 45% equity and 20% alternatives, which must have been implemented by the end of 2011.

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

Topics