NETHERLANDS - PFZW, the Netherlands' second-largest pension fund, achieved a positive return in 2007 for the €88bn pension fund, but suffered a negative return of -0.4% in Q4 because of the market shift and its impact on liability hedging.
Details of the Q4 2007 results show while the investment group produced a cumulative return of 7.2%, according to provisional figures, the pension fund's investment return dropped to -0.4% in the last quarter, and the higher long-term interest rate yield on fixed income - rising from 4.3% to 4.9% - "translated into a negative result on the liability hedge, which cost 2.2% percentage points in cover ratio".
All asset allocation sectors still managed to close the year with a positive 8.8% return elsewhere, despite the -1.6% result on liability hedging, and it was commodities and private equity which topped the investment performance in the last 12 months, to generate returns of 35.6% and 28.1% respectively.
Equities achieved a 7.5% return despite a -1.9% loss in Q4, and "portfolio strategies" achieved final year returns of 11.5% while fixed income returned 3.1%, convertibles raised 4.7% on investments, and structured credits earned 6.3% in 12 months.
Interestingly, one sector which saw a larger drop in its negative return in the last three months of the year was real estate, delivering a negative return of -4.9%. albeit this was created by an accounting shift which saw the 14.5% portfolio weighting holding move from net asset value to market value on the firm's balance sheet - at a cost of €878m.
The fund's cover ratio at nominal market interest rate shifted to 147% in December 2007, down from 153% in September 2007, because of market turbulence, says the pension fund, while the year-end real cover ratio was 96% - just under PFZW's aspiration of 100%, according to Peter Borgdorff, PFZW's managing director.
"Given the difficult market, the pension fund has had a good year and is well-placed to face the problems that lie ahead in 2008. I'm pleased we have been able to index pensions in full. We intend to continue on our chosen path, with a sound and challenging policy," added Borgdorff.
Pensioenfonds Zorg en Wilzijn (PFZW) became the new name of the PGGM pension fund on January 1, as PGGM is now a separate administration arm charged with running assets on behalf of the fund.
If you have any comments you would like to add to this or any other story, contact Julie Henderson on + 44 (0)20 7261 4602 or email email@example.com