NETHERLANDS - ABP, the  €216.5bn industry-wide pension fund for Dutch civil servants, praised 2007 as a good year, despite booking its lowest investment return in years.

The fund returned 3.8% in 2007 - a year which ABP describes as "two-faced" because of relatively good results in the first half but a steep decline in the second - however this is significantly lower than the 9.5% return achieved in 2006, as well as the 12.8% and 11.5% in the years before that.

Presenting its annual report today, ABP said the effects of the credit crisis remained limited because of its "consistent investment strategy".

ABP's cover ratio increased from 133.5% to 140% at the end of last year, enabling a full indexation as well as the previously announced post-indexation of 4% to catch up on indexation cuts in previous years.

Private equity, representing 3.4% of invested assets, along with infrastructure (1%) and commodities (3.2%) peaked in the fund's investment mix, with returns of 29.4%, 21% and 31% respectively.

Fixed income, making up just over 40% of ABP's investment assets, returned 1.9%, while equity - amounting to approximately 38% of asset allocation - yielded 5.3%, lower than the 13.5% return in 2006, because of the effects of the credit crunch.

Real estate investments, which represent 9.2% of the portfolio, performed worst with a negative result of -9.4%.

Elco Brinkman, exiting chairman of the fund, said today the current cover ratio is at 138%, the fund's assets are now €218bn.

The fund thinks the growth of €1.5bn signifies things are looking up since the credit crisis hit rock bottom in the months February and March of this year.

ABP said it has lowered its threshold for full indexation from 140% to 135% but "such a decrease is possible without impacting on the risk profile," according to ABP.

The fund hinted when the real cover ratio hits 100% - amounting to a cover ratio of 150% in nominal terms - it would consider cutting premiums.

Commenting on the results, Brinkman said: "Our policy is focused on indexing the pension of our participants fully and durably against a payable price, though without giving guarantees about full indexation."

Brinkman last week announced he would step down as chairman of the fund within a year, following his appointment as chairman supervisory board of the recently-launched investment manager APG - a wholly-owned division of ABP created to manage the assets and administration of the ABP pension fund. The two roles would clash, he said.

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