NETHERLANDS - The €1.8bn pension fund for cleaners and window cleaners saw its 14% return on investments fall by 7.7 percentage points, largely due to its 75% hedge of the interest risk on its liabilities.
An additional loss of 0.2% on the 75% hedge of the four main currencies contributed to an overall result of 6.1%, the scheme said in its 2009 annual report.
However, pension fund officials said the extensive interest hedge, through long-term bonds and interest swaps, also prevented the scheme's coverage ratio to plummet in the wake of falling interest rates - the criterion for discounting liabilities.
They added that the funding ratio was still 99.7% at the end of August, down from 110% in December 2009.
Following its interest hedge combined with its investment mix, the scheme's required financial reserves equated to a coverage ratio of 113%.
The pension fund said its 64% fixed income portfolio returned 10.2%, with credits returning 7.6%.
The 46.5% return on high-yield bonds fell 14 percentage points short of its benchmark, due to underweight positions in the financial sector and lowest-grade bonds.
The 25% equity holdings of the scheme returned 34%, due to the performance of "strong companies in the US and Europe", officials said.
The scheme's alternatives portfolio generated 3.6%, with infrastructure, commodities and private equity returning -3.5%, 20.9% and -14.4%, respectively.
Direct property and liquid assets delivered -1.7% and -2%, respectively.
Officials added that the fund's tactical asset allocation contributed positively to the overall result due to its countries policy.
The cleaners pension fund also said it has lowered its indexation ladder to speed up its recovery to the required minimum funding of 105%.
It did not grant any indexation on 1 January, but officials said this had no consequence, as the consumer index between June 2008 and June 2009 was zero.
The scheme's board also said it expected to recover its financial position without raising contributions.
The pension fund changed its pension provider from Syntrus Achmea Pension Management to Cordares Pension Services on 1 January, but kept its asset management with Syntrus Achmea.