Stock-market recovery helps lift funding levels at KLM pension funds
KLM’s three largest pension funds said they have benefited from improving equity markets, stabilising oil prices and “nearly stable” interest rates over the third quarter.
All three schemes – whose assets are managed by Blue Sky Group – reported rising coverage ratios on the back of quarterly returns as high as 3.5%.
The €2.9bn pension fund for cabin staff posted the best quarterly result, adding that its year-to-date return stood at 10.8% as of the end of September.
The Pensioenfonds KLM Cabinepersoneel’s fixed income holdings returned 1.7% over the period, while equities returned 4.8% and real estate 1.6%.
The results took the year-to-date returns for the three assets classes to 9.3%, 4.8% and 4.6%, respectively.
The scheme’s interest hedge resulted in 4 percentage points of return over the past three quarters.
Meanwhile, the €8.1bn pension fund for KLM ground crews returned 3.1% in the third quarter and 10.2% over the first nine months of the year.
Its funding rose by 0.7 percentage point to 102.4% as of the end of September.
Although its official policy coverage – the twelve-month average of its funding, and the criterion for rights cuts and indexation – dropped just below the required minimum level of 104.2%, the board of the Algemeen Pensioenfonds KLM said it saw no reason for a review of its asset allocation or de-risking measures.
It pointed out that it only recently abandoned its tactical asset allocation while at the same time deciding to slightly reduce its emerging-market equity allocation.
Lastly, the €8.3bn Pensioenfonds Vliegend Personeel KLM reported a quarterly return of 2.6% and a year-to-date result of 7.1%.
While the pilot pension fund’s coverage improved over the third quarter, its policy funding fell by 2.1 percentage points to 115.5%, 8.3 percentage points short of its required financial buffer.
The airline and VNV, a union for pilots, are locked in a legal dispute over whether the employer is obligated to plug this funding shortfall.
The Pensioenfonds Vliegend Personeel KLM is also preparing a lawsuit against KLM after the airline cancelled the contract as a result of the same dispute.