NETHERLANDS - The €850m pension fund of building company VolkerWessels won't be able to raise its 70% hedge of European inflation, because of disappointing returns on investments last year.
The scheme reported a negative overall result of -1.2%, which left its cover ratio unchanged at 122%, just 4% above the required minimum financial buffer.
VolkerWessels' €413m matching portfolio returned -2.1%. The portfolio's assets are fully hedged against interest risks and 70% against inflation risks. This portfolio is managed by First Pensions, run by ex-Vanguarder Henk Beets.
The scheme attributed the result mainly to corporate loans and covered bonds, which performed poorly, contrary to liquid government bonds.
The pension fund's diversified return portfolio - managed by EIM with an absolute mandate for investments in equity, hedge funds and property - yielded 0.8%.
The scheme's strategic allocation to fixed income, equity, property and hedge funds is 49%, 26%, 8% and 16% respectively.
Since 2006, the scheme has separate matching and return portfolios, aimed at stabilising its cover ratio.
The board of the VolkerWessels' scheme made clear it is considering proposals to increase its grip on ‘contracted-out processes' by getting updates on financial and administrative developments each quarter rather than on a yearly basis.
Pensioenfonds VolkerWessels granted its 4,250 active participants full indexation in 2007. However its 3,375 deferred members and 2,340 pensioners are still 2.1% short of being compensated for inflation, because they have missed out on the 2003 indexation.
The funding ratio at year-end was also insufficient for a full indexation in 2008, while the present prospects for compensation in 2009 year are not promising either, the scheme indicated.
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