NETHERLANDS - The TNT postal fund has doubled its allocation to inflation-linked bonds at the expense of EMU government paper.

In order to further decrease its inflation risks, the fund has also raised exposure to actively managed bonds from 40% to 50%, according to the annual report.

The €4.6bn scheme reported a net return of 2.4%, falling 1.5% short of its benchmark. Thanks to rising interest rates, its cover ratio increased by 7.9% to 141.6%.

The funding ratio has dropped to 132%. The report claimed that because of a large spread of investments and a large hedge against interest risks, the decrease was not substantial.

Although TNT's strategic portfolio remained almost unchanged, in line with an ALM study, its board decided to raise the equity allocation to emerging markets and its world portfolio. This came at the expense of European shareholdings.

The scheme's equity returned 4.8%. Its equity portfolio is managed through multi-manager funds, which hire specialist external managers for equity selection.

TNT's fixed income portfolio yielded 1.2%.  Property returned 6.2%, with very contrasting results, as passively managed listed real estate and direct Asian property yielded -27.6% and 28.9% respectively.

Commodities - comprising 4% of TNT's assets - yielded 30.5%. Hedge funds returned 1.7%. The pension fund has allocated 3% in this asset class through two fund of funds managers, who apply approximately 100 and 40 strategies respectively, it indicated.

According to the scheme, its 3% Global Tactical Asset Allocation resulted in negative returns of -10.9%. Its interest swaps also contributed negatively, showing a yield of -2.1%.

The interest swaps portfolio consisted of approximately €1bn of TNT's assets at the end of the first half of 2008. Its negative yield caused a loss of 0.3% to the scheme's overall return during this period, Roelie van Wijk, CIO of asset manager TKP told IPE.

The Stichting Pensioenfonds TNT has largely hedged its currency risk against the euro in its fixed income portfolio. Last year, it fully hedged exposure to the British pound and the Japanese yen, it said.

In combination with its interest swap portfolio, the pension fund has hedged 53% of the interest risk of its liabilities, it added.

The postal scheme has 43,645 active members, 36,125 deferred participants and 16,455 pensioners. Last year, the scheme granted its postal workers 0,75% indexation, based on the wages index.