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Stock-market recovery helps lift funding levels at KLM pension funds

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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.

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