NETHERLANDS - Three large Dutch pension funds - PFZW, PMT and PME - suffered from falling financial markets combined with very low long-term interest rates, resulting in marginal returns during the second quarter.

The €90bn healthcare scheme PFZW even posted a 1.2% loss, attributing the disappointing result to "concerns about the creditworthiness of some European countries", as well as "doubts about the strength of the economic recovery".

It added that its coverage ratio dropped by 10 percentage points to 99%, following a drop of long-term interest rates by almost 0.5 percentage points to less than 3.2% during the second quarter.

Dutch pension funds must account their liabilities against these long-term rates.

Only private equity and high-yield bonds generated positive returns of 6.3% and 2.9%, respectively.

PFZW attributed the high-yield bond result to various types of credits and the financing of emerging markets debts in local currencies.

Commodities produced a loss of 14.4%, largely due to declining oil prices, while the scheme's equity and property portfolios fell by 7.6% and 3.6%, respectively.

PFZW's hedge against interest risk on liabilities, as well as inflation, contributed 8.8% to its result.

The €35bn pension fund PMT returned a modest 0.7%, while its coverage ratio dropped from 98% to 93% during the second quarter due to "the extreme low interest swap rates".

The scheme for metalworking and mechanical engineering reported positive results on fixed income, interest swaps and swaptions, which it is holding against interest risks on its liabilities.

Equity, fixed income and property returned -5.5%, 0.6% and -1%, respectively, while PMT's alternatives allocation yielded 0.8%.

According to PMT, the uncertainty on the capital markets and low interest rates have caused its actual improvement to fall behind its recovery plan.

With a quarterly return of 2.7%, the €22bn metal scheme PME was the best performing large pension fund, although it also saw its coverage ratio drop from 99% to 93%.

The pension fund for the metal and electro-technical engineering industry explained that it could not profit from a rise of the main currencies because of its hedge against a decrease of those currencies.

Fixed income delivered an absolute return of 5.7%, largely due to long bonds and interest swaps.

Property and alternatives also delivered positive yields of 0.6% and 5.5%, respectively, while the scheme lost 9% on its equity holding.