NETHERLANDS - Giant Dutch pension fund ABP booked a fourth quarter return of 3.9%, and a total return of 9.5% for 2006, raising the scheme's entire assets to €209bn.

The fund, which saw its assets grow by €8bn since mid-2006, announced the positive Q4 results alongside its new strategic investment portfolio and framework until 2009.

It is the fourth consecutive year of positive results for the fund, which is now 133% funded, up from 120% at the beginning of last year.

ABP chief investment officer Roderick Munster said in an exclusive interview with IPE that he is "mildly" positive: "We'll see interest rates go up in the next three years and that returns will be somewhat lower."

Munsters added: "Our long term expectation is that, with our new [investment] mix, we will make 6% or 6.2%, we will add an outperformance to that which will take us to 7% nominal."

Tom Steenkamp, asset allocation and research chief investment officer at the scheme, explained the fund's new asset allocations in its main classes: "We have shifted fixed income securities from 44% to 40%, which means that we have increased our real assets from 56% to 60%."

The fund will increase its shares in emerging markets, its private equity and hedge fund holdings; also, the fund has set aside 2% to invest in global infrastructure, and another 2% for innovation, "for ideas the we cannot place in the current portfolios", Steenkamp told IPE.

"In the long term real assets give much higher returns than fixed income assets," he added.

ABP will also introduce a new investment framework over the next three years, with a more explicit link between investments and liabilities, though equal to the existing investment portfolio.

"We will focus on a liability hedging portfolio, with a minimum mismatch risk in real terms, and a risk optimising portfolio, with the highest possible returns in real terms," according to Steenkamp.