The large Dutch civil service scheme ABP attributed its annual return of 6.2% in part to deliberately holding on to its investments in government bonds of Southern European countries.
While several other large pension funds reported considerable losses on their government bond portfolios, ABP’s annual figures showed a 2% return on a 15.4% allocation to government paper.
An ABP spokesman said: “In contrast to the situation Northern Europa, the interest on government bonds of Spain, Italy and France has decreased. Our investments in these countries totalled approximately €34bn at the end of 2012.”
Other large pension funds have largely divested their holdings in periferal government bonds and focused on AAA, euro-denominated government paper instead.
ABP saw its assets increase to €300bn, following a return of 2.4% over the last quarter.
As a result, its coverage ratio increased to 105.9%, 1.7 percentage points above the required minimum.
Based on the funding at year-end, ABP said it would reverse the 0.5% rights cut of last year.
However, because of the early stage of the recovery, ABP has decided against indexation, and to maintain the recovery levy of 3 percentage points in the contribution of 21.6% of the pensionable salary, according to Henk Brouwer, the scheme’s chairman.
ABP reported a 1% profit on its combined nominal fixed income investments, but added that it lost 4.1% and 2.7%, respectively, on its inflation-linked bonds and alternative inflation.
Developed country equities generated no less than 22.1% last year, while emerging market equities lost 6.1%.
With an annual result of 17.5%, private equity was the best performing part of its 25% alternatives portfolio.
Property and hedge funds returned 1.3% and 1.8%, respectively.
In contrast, the scheme’s 4% holdings of commodities lost 3.9%.