Dutch pension funds with large fixed income portfolios have reported strong first-quarter returns thanks to falling interest rates over the period.

Because the drop in interest rates had an even bigger impact on their liabilities, however, they saw their coverage ratios fall.

Vervoer, the €22bn sector scheme for public road transport, returned 9.1% over the period, due largely to its 62% fixed income allocation.

Its funding, however, fell by 2.8 percentage points to 97.7%.

The €18.3bn Philips Pensioenfonds attributed its 5.5% quarterly return to “strongly performing euro-denominated government bonds and credit”, which comprise 35% and 5% of its investment portfolio, respectively.

Interest and inflation hedges contributed 0.9 percentage points to the quarterly return.

The Philips scheme made a loss on its 29% equity and 10% property allocations.

Its emerging-market debt and high-yield credit holdings underperformed over the period relative to their benchmarks.

Funding at the Philips Pensioenfonds fell by 2.9 percentage points to 106.4%.

Lastly, the pension fund of technical research institute TNO reported a 3.9% return over the period.

Because liabilities increased by 9%, however, the scheme lost 5.3 percentage points of funding, which at the end of March stood at 104.9%.

The €3.2bn pension fund singled out bonds as the chief contributor to its quarterly result.

Its fixed income portfolio, which includes mortgages, generated 6.5%.

By contrast, the pension fund made losses on equities (-5.3%), property (-0.6%) and private equity (-3.4%).

Its interest and currency hedges each produced 0.7 percentage points of return over the period.