NETHERLANDS - The €201bn ABP pension fund saw investment returns hit 20.2% in 2009, and is working under a new investment strategy, according to officials.
Figures presented today by the civil servants pension scheme showed the fund's cover ratio increased from a low of 83% in March 2009 to 109% by the end of last year.
That said, the scheme's decision to make a financial provision for increased life expectancy reduced the funding ratio by five percentage points, officials stated in the report covering activity for the second half of 2009.
ABP's securities portfolio - amounting to 54.7% of assets - delivered the best result and generated a 24.6% return, with emerging markets equities returning over 70%.
The scheme's 38.7% holding in fixed income investments also performed well as they returning 12.7% thanks mainly to corporate bonds, officials said. Hedge funds and "innovative"' investments also generated a 10.6% return last year.
Despite the encouraging results, ABP chairman Ed Nijpels still urged members to view the results cautiously.
"Although we have found the way up, the markets remain volatile and we don't know what is around the next corner," he argued.
ABP said it has a new strategic investment policy of increased allocations to inflation-linked investments and emerging markets equities, while it has decreased allocations to corporate bonds and developed markets equities.
It added that the accompanying risk framework will be aimed at a "relatively proper performance" in differing economic scenarios, and will include additional measures to protect against interest rate and inflation risk.
In 2009, ABP's 90% currency risk hedge - against the US dollar in particular - led to a positive return of €1.3bn, officials added.
In contrast, the partly-hedged interest rate hedge on its liabilities created a -0.4% return during the same period.
ABP is one of the three largest pension funds in the world with over €200bn of assets and 2.8 million members.
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