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Philips pension fund cuts fixed-income allocation on rising interest rates

Stichting Philips Pensioenfonds, Zeist, Netherlands, reduced its fixed-income allocation as it expects interest rates to rise over the coming years.

The €18.8 billion ($20 billion) pension fund said on its website that its allocation to fixed-income was decreased to 50%, from 60%. The pension fund sold some of its European government bonds, reducing its exposure to those bonds to 25% of the overall pension fund from 35%. The notice said the choice of divestment was also related to reducing political risk around the euro.

Proceeds from the bond sale were reinvested in equities, with exposure for that asset class increasing to 30% from 29%; in real estate, with the allocation increasing to 12.5% from 10%; and in cash. The pension fund’s exposure to cash increased to 7.5%, from 1%.

The pension fund’s other allocations remain unchanged: 5% each global government bonds, global corporate bonds, mortgages, high-yield bonds and emerging markets debt.

Spokesmen could not be reached for comment by press time.