NETHERLANDS - The €11.3bn pension fund for the Dutch printing industry PGB saw its return over the first nine months almost double to 13% thanks to an extensive interest and currency hedge.
Over the period, PGB returned 7.6% on investments, making considerable gains from a 60% hedge of the interest risks on its liabilities due to dropping interest rates, it said.
The 98% hedge on the main currencies - through currency forward contracts - also contributed to the scheme's performance.
However, because long-term interest rates - the criterion for discounting liabilities - fell from 3.18% in June to 2.79% in September, PGB's returns had a limited impact on its coverage ratio, which increased by 1.2 percentage points to 102.4% during the third quarter.
The scheme stressed that its present funding was in-line with the mapped out improvement in its the recovery plan, which has targeted a coverage ratio of 100.3% by year-end.
It also conceded it had yet to make financial provision for the most recent longevity predictions made by the Actuarial Society (AG).
Theo Flach, spokesman at PGB, said: "Although the AG has calculated 2% of additional liabilities, we are still analysing the effects for our specific population."
PGB has also recently appointed two experts as advisors on risk and asset management and is now lining up their appointment to the board, Flach said.
The pension fund said it was working on a new set-up for its board, as well as for balanced management and asset management.
PGB's fixed income investments returned 4.2% during the first nine months, with government bonds, credits and inflation-linked bonds generating 8%, 2.2% and 5.3%, respectively.
Emerging market bonds and high-yield bonds - returning 22% and 19.1%, respectively - were the best performing investments, while equity holdings returned 10.4%.
Property, commodities and hedge funds returned 5.8%, 0.9% and 1%, respectively.
The combined return for infrastructure and sustainable investments was 4.9%.