The €18bn pension fund of banc-assurer ING has seen its investments generate a 0.2% loss over the third quarter, largely due to negative returns on its fixed income portfolio.
However, due to a rise of the euro, the scheme’s full currency hedge delivered a 0.2% return, leading to a flat quarterly result, the fund said.
An increase in long-term interest rates of up to 0.2% caused a 1.2% loss on the pension fund’s 67% fixed income holdings, which include interest swaps.
As the purpose of this portfolio is largely to hedge interest risks on liabilities, it has a long duration, which increased the pension fund’s susceptibility to interest-rate fluctuations.
The 24.2% equity portfolio returned 2.5% during the third quarter, mainly thanks to the performance of European and developed-market equities, ING said, adding that the performance of low-volatility equity was negative.
The Stichting Pensioenfonds ING attributed the 0.6% return on its 5.6% property portfolio in particular to its listed real estate holdings.
It further made clear that, mainly due to a weakening US dollar, its 2.7% alternatives investments, consisting of private equity and hedge funds, lost 0.3%.
The ING scheme said its coverage ratio, based on market value, increased to 122.8% as of the end of September, whereas the official funding – based on the three-month average plus the ultimate forward rate – rose to 126.8%.
The pension fund has 72,910 participants.
Following the European Commission’s decision that its sponsor must be divided up into a bank and an insurance company, as a consequence of government support during the financial crisis, the pension fund is also facing a split-up into two schemes.