NETHERLANDS - Stichting Pensioenfonds ABP, Europe's largest pension fund, says its financial position "deteriorated" in the second quarter due to low interest rates.

It returned 4.3% on investments in the quarter, and 5.9% in the first half - resulting in a €10.2bn rise in assets to €178.3bn. But nominal liabilities at the civil service scheme rose by €15.8 billion due to lower rates.

"Based on current market interest rates, the financial position has deteriorated," the Heerlen-based fund said in a statement. Its coverage ratio - based on the new market value measure - fell to 115.5%. The scheme said the coverage ratio would have been 122.6% using the former fixed rate of 4%.

It added that the rise in the liabilities was "almost completely attributable to the transition to calculating the liabilities on the basis of current market interest rates".

The prevailing 3.6% rate at the end of the second quarter meant that the coverage ratio deteriorated by 5.8 percentage points compared with the end of December.

"The recent figures show the positive and negative sides of the current fall in interest rates," said chief financial officer Dick Sluimers.

"Fixed-income securities are making a positive contribution to assets, but the value of the liabilities is rising and therefore, on balance, the coverage ratio falls.

"ABP will use the possibilities offered within the new financial assessment framework (FTK) to reduce the susceptibility of its premium policy to interest rates, but nevertheless, developments in interest rates will remain an important factor in the financial policy of the pension fund."

Fellow large Dutch schemes PGGM and PME Metalektro also reported second-quarter returns today.

Civil service fund PGGM made a 3.6% return in the period, with equities coming in at 4.6% and fixed income at 3.2%. Commodities - which returned +25% in the first quarter, posted a return of -4.4%. The Zeist-based fund has grown to €64.7bn.

Schiphol Zuidoost-based PME returned 6.3% in the second quarter, taking its coverage ratio to 124%, from 118% at the end of the first quarter.