The €3.8bn sector scheme for Dutch bakers (Bakkers) is assessing options for further co-operation with the €2.4bn pension fund for the confectionery industry (Zoetwaren).

However, a merger between the two pension funds was not yet under discussion, according to its annual report for 2016.

Both pension funds have already co-operatied in several areas to save costs. Last year, Zoetwaren replaced Syntrus Achmea as its administration provider with TKP Pensioen. Bakkers had been a TKP client for some years.

Both schemes announced their co-operation, anticipating a possible merger, in 2014. At the time, they cited sharing an actuary, an accountant, a joint pensions bureau as well as communication as possibilities for synergy and cost reduction.

However, the difference in funding ratios has proven a barrier to a full merger. At June-end, the bakers’ scheme’s funding stood at 98.9%. The coverage ratio of Zoetwaren was 105.2% at the end of May.

Bakkers reported a net overall return of 10%, crediting the outperformance of almost 2 percentage points chiefly to its return from government bonds relative to interest rate swaps, as well as outperformance from commodities and equity.

Last year, the scheme had hedged 55% of its interest risk through swaps, Dutch, German and French government bonds, Dutch residential mortgages, and credit in its matching portfolio.

It also held 2% in US high yield and equal holdings of emerging market debt (EMD) and liquid assets.

With a 10% gain on fixed income, Bakkers fell 2 percentage points short of its benchmark. It attributed the underperformance to disappointing results on high yield and EMD.

Equity generated 8.2%, beating its benchmark by 1.7 percentage points. The pension fund made clear it had focused on European stock of profitable large companies with a stable cashflow and low leverage.

Real estate returned 2.3%. Bakkers said its portfolio was equally divided across unlisted funds because of their “stable value” and listed funds for continental Europe, “as these are more liquid”.

Actively managed commodities delivered an 18.4% return, outperforming by 4.5 percentage points. Direct private equity investments produced 4.6%, relative to a benchmark return of 2%.

The pension fund indicated that it would like to use the one-off opportunity of raising its risk profile, once its funding had exceeded the minimum required level of approximately 105%. This would mirror the action taken by Zoetwaren in 2015.

Following a fall in the number of active participants, Bakkers saw administration costs increase from €110 to €126 per participant.

Its asset management costs increased slightly to 34 basis points, while transaction costs halved to 4 basis points.

At year-end, Bakkers had 177,375 participants in total, of whom 33,875 were workers and 21,475 were pensioners.