The €2.5bn pension fund of TNO returned almost 2.8% during the third quarter, taking its year-to-date result to 0.7%.
It said the return was mainly due to positive results on its 24% allocation to listed equity and its 58% bond portfolio, which generated almost 4.7% and 0.4%, respectively.
By contrast, the pension fund of the technical research institute lost 1.4% and 0.6%, respectively, on its holdings of non-listed property and private equity.
The scheme’s full hedge of the main currencies added 0.3 percentage points to its quarterly result, it said.
However, it added that it incurred a 1.2% loss on its 65% cover of the interest risk on its liabilities, following rising swap rates.
During the last quarter, the coverage ratio at Stichting Pensioenfonds TNO improved to 108.5% – 4.3 percentage points more than the required minimum coverage at year-end.
However, CIO Hans de Ruiter warned that a significant increase in rates or falling markets could still have an impact on funding.
“The liabilities must be discounted against the three-month average of the forward rate, contrary to our fixed income investments, that must be valued against the current rates,” he said.
“This means a rates increase during the last quarter would only cause a limited drop of liabilities, whereas this would cause an immediate decrease of fixed income holdings.
“Therefore, a rates increase poses a bigger risk for our scheme’s funding than a decrease.”