NETHERLANDS - The four largest pension funds in the Netherlands have improved their funding during the first quarter of 2011, mainly thanks to rising long-term interest rates.

The €239bn civil service scheme ABP and the €100.4bn healthcare scheme PFZW reported returns of 0.9% and 0.4%, respectively, and saw their coverage ratios rise by 7 percentage points to 112% and 111%, respectively.

The metal schemes PMT and PME reported an increased funding of 4.2 percentage points to 101% and 3 percentage points to 99%, respectively.

However, the metal schemes suffered from rising interest rates, following their relatively large fixed income allocation of 51% and 54%, respectively, resulting in quarterly losses of 1% and 2.2%.

That said, both schemes stressed that the improving effect of the rising interest rates on their liabilities cancelled out the "slight" decrease of their assets.

Peter Borgdorff, director at PFZW, said: "The recovery has proceeded well during the past six months, despite the additional financial provision we had to take for increased life expectancy."

He added that the mapped out recovery at PFZW was now ahead of schedule, but underlined that the pension fund remained highly dependent on the unpredictable movements of interest rates, the criterion for accounting liabilities.

Long-term rates rose by 0.4 percentage points to 3.8% during the first quarter.

At all schemes, commodities were the best performing asset class. PFZW and ABP reported returns of 14% and 10.1%, respectively, and attributed the result to rising oil prices.

ABP - the world's third largest pension fund - said equity of developed and emerging markets delivered contrasting returns of 2.2% and -4.3%, respectively.

Its holdings in government bonds and inflation-linked bonds generated -1.2% and 1.6%, respectively, whereas property and infrastructure returned 3.2% and 2.6%.

PFZW saw its high-yield bond portfolio deliver 3.6%, while its government bonds lost 4.4%.

The equity and property allocation of the healthcare scheme returned 1.5% and 2%, respectively, during the first three months of 2011.