NETHERLANDS – The €18.5bn pension fund of banc-assurer ING has reported a return on investments of 14.4% in 2012 on the back of a 3% return during the fourth quarter.

The scheme attributed the quarterly 3.5% return produced by its 63.7% fixed income portfolio to decreasing interest rates and corporate bonds, "following a strong drop of the risk premiums on credit".

It also claimed negative sentiment on US markets and the depreciation of the US dollar against the euro were largely responsible for the 0.8% loss generated by its 25.8% equity allocation in the fourth quarter.

The pension fund reported year-to-date returns of 11.9% and 12.3% for fixed income and equities, respectively.

It said its 6.2% property portfolio suffered from the same factors as its equity investments, generating a 0.8% loss in Q4, but delivering 9.1% over the entire year.

The pension fund also lost 2.1% on its alternative investments during the last quarter due to falling commodity prices. However, the asset class returned 2.2% for the scheme over the course of 2012.

The ING scheme said its 95% hedge of interest risk generated a 3.1% result over the year.

During the last three months of 2012, it saw its coverage ratio increase by 3.6 percentage points to 125.2% under the required forward curve with the ultimate forward rate.

However, it indicated that funding under market rates at quarter-end was 118.8%, pointing out that, according to its board, market funding provides "more clarity" about the actual coverage and developments of the scheme's financial position.

As a consequence, the board has opted to use market funding for the implementation of its policy on investments and risk assessment.