NETHERLANDS - The coverage ratio of the largest Dutch pension funds has risen considerably in the last six months thanks to an increase in long-term interest rates and a resulting drop in liabilities.
According to first half figures issued this morning, the €86bn healthcare pension scheme PGGM saw a rise of its funding ratio of 19% to 153% in the first six months of 2007 while ABP, the €215bn civil service pension fund, saw its coverage ratio increase by 15% to 149%.
PGGM's total returns were 4.9% during the first six months, with private equity (17.5%) providing the best returns. Yields of property and equity were 10.5% and 9.2% respectively, all driven by the benefits to be had from rising interest rates, whereas the knock-on effect is fixed income and inflation-linked bonds had a negative yield of -0.6% and -0.1% respectively.
As part of its results announcement, PGGM also said it will publish, from today, an extensive list of its investments in fixed income, listed equity and property funds on its website.
PGGM saw its participants increased by 1.5% to 2.1 million to the end of June 2007 through the scheme's19,200 participating employers.
ABP said its investment portfolio returned 3.1% during the first six months, with private equity again being the best performing asset class with a yield of 18.2%, followed by equity, hedge funds and commodities which returned 9.2%, 8.5% and 6.4% respectively.
Returns from fixed income and property was negative, yielding -0.7% and -1.9% respectively.
According to ABP - which now has 2.7 million participants - the sharp drop in real estate returns was mainly because of worries about the US sub-prime mortgage market, as well as rising interest rates which makes financing more costly.
Meanwhile, PME, the €21bn industry-wide pension fund for the metal and electro-technical engineering industry, reported total returns of 2.2% during the first six months.
The outcome was affected by negative returns of -3.7% on the hedging of interest rates over three-quarters of its liabilities, the scheme pointed out.
Its asset class ‘special projects', which include investments in timber, US life insurance policies and local Chinese equity, returned 25.8% while equity, property and commodities yielded 12.2%, 2.8% and 3.7% respectively.
PME, which recently contracted out its asset management to Mn Services, saw its coverage ratio rose by 8% to 136%.