The €7bn KLM pension fund for ground staff said it had divested its entire holdings in Russia during the third quarter, following the deployment of a new risk assessment tool. 

Besides market risk, the potential escalation of the European Union’s boycott of Russia also posed a too big country risk, it indicated in its quarterly report.

The Algemeen Pensioenfonds KLM reported a quarterly result of 1.8%, mainly thanks to positive returns on its 48.3% fixed income portfolio (1.7%) and its 41.3% equity holdings (1.4%). However, it lost 0.4 percentage points on its property investments.

It said its year-to-date result was 9.9%, of which 1.4 percentage points was thanks to its hedge of the interest risk on 50% of its liabilities.

Despite its positive result, the pension fund’s coverage ratio dropped no less than 6.1 percentage points to 117% during the third quarter, following decreasing interest rates.

The official discount rate for liabilities – the three-month average of the market rate plus the ultimate forward rate – dropped from 2.45% to 2.14%, it added.

The KLM scheme for ground staff further said that it had invested €175m in Dutch domestic mortages – approximately 7.5% of its fixed income portfolio – during last quarter, and indicated that it was planning to invest another €75m in this asset class, “because of its above average return against a low risk”.

The €2.4bn KLM pension fund for cabin staff, or Cabinepersoneel, reported a 2.4% quarterly result, leading to a return of 12.1% during the first nine months of the year.

It said its holdings in fixed income, equity and property returned 1.1%, 1.4% and -0.5% respectively in the third quarter.

Declining interest rates came at the expense of 6.3 percentage points of its funding, which dropped to 117.4%, equating to a coverage ratio under real terms of 77.7%. 

The €7.7bn KLM scheme for cockpit staff, or Vliegend Personeel, said it returned 1% and 8.2% during the third quarter and the first nine months, respectively.

Its funding dropped 6.5 percentage points to 126.9% during the last quarter.

The asset management for the three KLM pension funds is carried out by Blue Sky Group.