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BPF Bouw beats out top Dutch pension funds with 100% coverage ratio

NETHERLANDS - BPF Bouw, the €34bn industry-wide scheme for the Dutch building sector, saw its coverage ratio increase by 0.3 percentage points to 100.7% on the back of a 5% return during the first three months of 2012.

Out of the five largest pension funds in the Netherlands, BPF Bouw now boasts the best coverage ratio, according to its first-quarter results.

However, 0.7 percentage points of its return came as the combined result of an 80% hedge of the main currencies and a 60% cover of the interest risks on liabilities, according to David van As, the scheme’s director.

He attributed the positive result in part to the effect of the scheme’s 4.9% holdings of inflation-linked bonds, as well as its 20% property portfolio, consisting mainly of high-quality residential real estate, which is also less affected by inflation.

Earlier this year, the building scheme reported an overall return of 10% for 2011, with its hedging policy contributing 8.1 percentage points of performance.

Chairman Henk de Pagter said the required coverage ratio of 105% at year-end could be achieved, and that the scheme would be unlikely to cut pension rights and benefits.

However, he also pointed out that BPF Bouw’s financial position was nothing to cheer about.

“During the last quarter, the financial markets were very volatile, and a real recovery is not on yet,” he said.

Van As said BPF Bouw’s return on equity, fixed income and property was 9.5%, 2.8% and 0.7%, respectively, adding that government bonds had returned 3%.

BPF Bouw further indicated that, up to now, it has been unable to compensate for 8.3% of salary inflation.

However, it is 6.9% ahead in granting compensation for price inflation, it added.

BPF Bouw is pensions provider for 815,000 active and deferred participants, as well as pensioners. The pension fund has 14,000 affiliated employers.

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