The pension fund posted an overall return of 10.6% in 2016, including a 3% gain from its interest rate hedge. It said it had reduced hedging coverage from 60% to 50% of the portfolio, following dropping interest rates, as part of its dynamic hedge.Its equity holdings returned 10.1%. Within this, passively managed investments in Europe gained 8.2% while active emerging markets allocations gained 13.9%.The scheme also hedged 50% of the currency exposure of its worldwide equity holdings to the dollar, the yen, and the pound, while hedging an equal stake of its European equity against the pound.The scheme’s diversified fixed income portfolio – of euro-denominated government bonds, credit, high yield, and emerging market debt – returned 6.4%.PostNL said it had also started investing in small cap equities and Dutch residential mortgages.The scheme’s 8% property holdings – predominantly non-listed real estate in Europe, Asia, and North America – delivered 11%, with actively and passively managed property yielding 12.7% and 3.4%, respectively.PostNL based its investment policy on a multi-manager approach through investment funds of TKP Investments as well as discretionary portfolios.Outside of the investment portfolio, PostNL said it had improved governance through the appointment of a secretary tasked with preparing the board’s strategic agenda as well as upgrading the structure of the scheme’s advisory committees.It also replaced its external supervisory committee with a supervisory board (RvT).The pension fund reported administration costs per participant of €156, and said it had spent 0.28% and 0.14% on asset management and transaction costs, respectively.At April-end, its funding stood at 112%. The Pensioenfonds PostNL has 95,285 participants in total, of whom 20,640 are active and 29,440 are pensioners. The €8.3bn pension fund for PostNL has more than doubled its strategic equity allocation from 12% to 29% in order to improve its risk-return ratio.In its annual report for 2016, the postal service scheme said the adjustment had come at the expense of its fixed income holdings, which were reduced to 63%.The scheme also simplified its investment portfolio by ceasing the use of options. Explaining the decision, it said the Netherlands’ new financial assessment framework (nFTK) allowed for a longer-term investment approach.In addition, the pension fund decided to divest its swap positions in order to reduce complexity.