Douwe Egberts move to interest rate swaps?
Replacing the asset class with swaps would improve the potential for indexation, making it easier for the fund to adjust income payments to its members by means of a price index fending off inflation.
The scheme is considering the strategy change as a function of ramping up its investment portfolio’s risk profile, which it is now weighing, van den Hoek explains.
DEPF’s long-term government bonds are in a matching portfolio, which represents 32.5% of the fund’s total assets. van den Hoek declined to speculate on whether the whole portfolio would be switched to swaps or if the fund would start with only a portion of it.
According to the fund’s 2014 annual report, DEPF introduced a 4.9% allocation to residential mortgages at the expense of its government bond portfolio last year.
The scheme reported an investment return of 18.8%, of which alternatives produced 7.5%, while equities returned 14.3%. The pension fund’s combined holdings in government bonds, mortgages and interest derivatives returned 25.2%.
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