NETHERLANDS - The €218bn civil service scheme ABP returned 4.6% on investments during the first six months of 2010, but saw its coverage ratio drop to 95% in the same period.
Its funding ratio fell by 9 percentage points due to the historically low long-term interest rates, it said.
It added that the decreased coverage had almost brought its funding back to the level mapped out in its recovery plan, which aims to meet the minimum required ratio of 105% by 2013.
Two weeks ago, ABP announced a temporary contributions increase of 1% to compensate for its narrowing coverage ratio.
The pension fund pointed out that interest rates - 3.9% on average in 2009 - had fallen to 3.2% at the end of June. Dutch pension funds must discount their liabilities against long-term interest rates.
Hedge funds were ABP's best-performing asset class, returning 8.9%.
The scheme's 23.8% holdings in corporate bonds performed best within its fixed income portfolio, returning 6.3%. Overall, the fixed income portfolio returned 4.1%.
Government bonds and inflation-linked bonds generated 3% and -0.2%, respectively.
ABP said that while its securities portfolio posted an overall return of 1%, its holdings in private equity and infrastructure returned 13.7% and 15.2%, respectively.
In contrast, its new asset class of 'alternatives inflation' - a mix of property, infrastructure and innovative products with stable returns - and developed-country equities fell by 4.8% and 2.8%, respectively, with its global tactical asset allocation yielding 0%.
ABP is among the three largest pension funds in the world, with assets of €218bn and more than 2.8m customers. Last year, it returned 20.2% on investments.