NETHERLANDS - Dutch pension funds' nominal cover ratio has improved from 95% to 109% on average in 2009, while their combined assets have increased by €86bn to €663bn, according to pensions supervisor De Nederlandsche Bank (DNB).

However, despite average returns of 15.9%, pension funds are still short of their peak position in 2007, when their funding ratio was 144% on average, and their assets totalled €690bn, according to the DNB.

The regulator's annual report also showed that Dutch schemes' real cover ratio rose from 71% to 81% on average last year, after a high of 108% in 2007

During 2009, pension funds' combined equity allocation had risen by 4.6 percentage points to 35.5%, while their fixed income portfolios had increased by 2.6 percentage points to 49.5% of their assets, including 6.4 percentage points of inflation-linked bonds. Equity and fixed income generated 31.9% and 11.5% respectively last year. Funds' combined property allocation decreased by 0.9 percentage points to 10% on average and returned 2.8% last year.

Meanwhile, Progress, the €3.4bn Dutch pension fund of food giant Unilever, saw its cover ratio rise from 101% to 119% on the back of a 22.4% return in 2009.

With a return of 37.3%, equity was the best performing asset class, with the scheme benefiting from the recovering markets after sticking to its equity allocation of 52%, it reported.

However, the pension fund's 33% fixed income portfolio delivered no less than 22.2%, mainly thanks to high-yield bonds, emerging market debt and investment-grade bonds, according to the scheme. Commodities also performed well, returning 27.5%.

In contrast, the Unilever scheme said it made a loss of 18.8% on its 7% property allocation. This was due to the sale of a large part of its Dutch direct real estate portfolio, following a decision to focus on international non-listed real estate funds.

Because of changes in the property market during the past decade, its property portfolio had become too small for direct investments in the Netherlands, the fund said.

Progress' private equity investments also delivered a negative result of -14.2%. The pension fund also said it would decrease its equity allocation in 2010, while shifting investments to smaller companies. In addition, it said it would increase its allocation to high-yield bonds at the expense of government bonds.