NETHERLANDS - Private equity and emerging markets were the best performing asset classes of the large Dutch civil service scheme ABP, returning 29.4% and 26.6%, respectively, in 2010.
ABP's preliminary figures for the fourth quarter showed an overall return of 13.5%, with assets growing by €28bn to more than €237bn.
Property and infrastructure, returning 16.8% and 23.5%, respectively, also performed well, while its developed market equity allocation returned 14.5%.
Over the same period, credit generated 8.1%, while government bonds and inflation-linked bonds, with a combined allocation of 19.4%, delivered 1.8% and -0.2%, respectively.
However, Joop van Lunteren, employers deputy chairman at ABP, said: "Because inflation remains a large potential risk, we are prepared to take the loss on inflation-linked bonds."
ABP's coverage ratio increased by 11 percentage points to 105% during the fourth quarter - mainly due to rising interest rates - and now includes 7.2 percentage points in total for increased longevity.
Because ABP's recovery plan targeted funding of 96% by year end, Van Lunteren said there would be no need to cut benefits.
However, he called for a change of the criterion for counting liabilities due to the volatility of the forward curve.
"Because a 1% change in the long-term interest rate causes a net change of the coverage ratio of 12%, we can't raise our contribution policy on these volatile interest rates," the deputy chairman said.
He suggested replacing the present forward curve with a seven-year average.
ABP's board will soon decide whether to raise premiums to a cost-covering level for this year. At the moment, the contribution is 21.4%.
The civil service scheme said it would continue to refrain from granting indexation this year, which means a shortfall of 8% in total of inflation compensation for its 2.8m participants.