GERMANY - The €20.1bn BVV Pensionskasse for banks will grant its members 4.5% interest for 2008 as it achieved a positive portfolio return last year.

Officials were able to deliver a positive return in struggling markets as the BVV reduced its equity exposure considerably in 2007 to 23.7%, and then dropped it again to 5% in the course of the crisis.

Together with various hedging measures which were then introduced, the actual equity exposure was almost zero, fund officials revealed in its annual review.

The rest of BVV's portfolio was invested mainly in registered bonds (68.8%), while fixed-income accounted for 6% of assets and real estate was worth 6.8% in both direct holdings and funds.

A restructuring was made last year hedge fund portfolio, worth 1.8% of assets, which was pooled into one multi-strategy fund of hedge fund with capital guarantee.

In total, the portfolio increased in value by 3.5% over the last year and this contributed to the interest granted to members.

The BVV noted it will not pass on some of the profit which was due to be paid out as profit shares in 2010 but will instead use the money to fill the buffers.

The BVV set up a pensionsfonds last year which now has €19.2m assets under management.

This is not the largest gain to be had so far by German pensionskassen, as a much smaller fund for cooperatives in Germany last week reported positive returns for 2008, having also divested from equities. (See earlier IPE article: German pensionskasse delivered 4.8% in 2008)

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