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KLM schemes boost funding through 2017 returns, rate rises

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Dutch pension funds including airline KLM’s three schemes benefited from rising interest rates and positive investment results during the second quarter of 2017.

The coverage ratio of most of them rose by several percentage points since March.

With an investment result of 0.7%, the Algemeen Pensioenfonds KLM – the airline’s €8.3bn pension fund for ground staff – posted the best quarterly performance among the larger schemes in the Netherlands. It generated a 3.2% yield over the first six months of the year.

Its funding ratio rose 2.9 percentage points to 109%.

The €3bn Pensioenfonds KLM Cabinepersoneel generated 0.6%, in part thanks to a 1.8% result from its equity allocation. This took its year-to-date result to 3.4%.

Coverage of the pension fund for cabin staff increased by 3.3 percentage points to 106.3%.

The Pensioenfonds Vliegend Personeel KLM, the€8.5bn fund for pilots, reported a second quarter return of 0.4%. In the first six months of 2017 the scheme gained 3%.

Its funding ratio improved by 3.1 percentage points to 120.5%.

Meanwhile, PGB,the €24.5bn multi-sector pension fund, said it returned 0.1% over the second quarter and 2.1% over the first half of 2017.

Since March, it lost 1.7% and 0.1% on government bonds and credit, respectively. In contrast, residential mortgages and inflation-linked bonds delivered positive results of 1.1% and 2.6%, respectively.

Within its return portfolio, PGB achieved quarterly profits on equity (1%) and property (0.5%).

However, it had to sacrifice 4.2% on alternative fixed income, 1.4% on infrastructure and 0.6% on private equity.

Despite this, PGB’s coverage ratio rose by 2.4 percentage points to 100.8%.

The €23.5bn sector scheme for the private road transport sector (Vervoer) reported a quarterly gain of 0.4%, but indicated it was 0.1% in the red over the past half year.

However, its funding rose 1.4 percentage points to 101.8%.

Recently, the five largest Dutch pension funds reported a funding improvement of approximately 2 percentage points during the second quarter, as a consequence of reduced liabilities in the wake of rising interest rates.

However, none of them had generated positive quarterly returns. The best performer on a relative basis was the €389bn civil service scheme ABP, which did not generate a return or a loss. It gained 1.9% over the first six months of 2017.

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