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.

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