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Funding at Dutch pensions giant ABP weighed down by longevity figures

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NETHERLANDS – The large civil service scheme ABP saw its funding drop by 1 percentage point to 96% despite a quarterly result of 2.4%, as it had to factor in 1.8% of additional liabilities for new longevity predictions.

As a consequence, the pension fund said it could not avoid the already expected rights cut of 0.5% on 1 April, adding that a second discount of 1.6% was still possible for next year.

ABP's assets increased to €281bn in 2012 on the back of an overall return of 13.7%.

The scheme reported returns of 10.5% and 14.3% on fixed income and securities, respectively, with developed market equities (16.1%), emerging market equities (17.2%) and property (16.2%) the best performing portfolios.

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ABP's investments in private equity, commodities and infrastructure generated 11.2%, 4.4% and 4.9%, respectively, while hedge funds and Global Tactical Asset Allocation (GTAA) delivered profits of 7.1% and 0.2%.

The overlay of a currency and interest hedge contributed 1.5 percentage points to the overall result.

Meanwhile, the €47bn metal scheme PMT confirmed a rights cut of 6.3% next April, following a funding of 92.4%.

PMT – the largest pension fund in the market sector – posted a quarterly result of 2.6% and a yearly return of 12.6%.

It said investments in equity, fixed income, property and alternatives returned 15.1%, 13.1%, 9.6% and 2.5% last year.

The €37bn pension fund for the building industry, BpfBOUW, reported a yearly result of 15.3%, following a profit of 2.3% during the last quarter.

BOUW's equity, fixed income and property portfolios produced positive returns of 16.4%, 9.8% and 1.6%, respectively.

David van As, the scheme's director, attributed the low return on property to BOUW's relatively large holdings of rental housing and said this reflected the falling value of domestic property.

"However," he added, "the prospects for rental property are good because of its scarcity."

With a funding of 105.8%, the pension fund for the building sector has the best financial position of the five largest pension funds in the Netherlands.

Although the coverage ratio of the €32bn metal scheme PME rose by 1 percentage point to 93.9% during the last quarter, it said it could not avoid a 5.1% rights cut in April, adding that an extra discount in 2014 was still possible.

PME returned 13% on investments last year, mainly thanks to results on equity (15.7%) and fixed income (10.5%).

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