NETHERLANDS - The €3.4bn pension fund of the social security provider UWV is reviewing the managers of its equity mandates following disappointing returns.

The fund's annual report reveals that the fund returned 1.6% in 2007, but this was 1% short of its benchmark, and the fall in returns was attributed mainly to the modest performance of some equity managers.

Equities returned 2.2% but a 4% overweight position on the 28% strategic allocation dampened performance in the second half of 2007, the scheme said. Commodities were the best performing asset class with returns of 20%, while convertibles also returned 4.5%.

The fixed income portfolio - making up almost 48% of the assets but still listed as underweight by 6% - delivered a negative return of -0.1%.

The UWV scheme's property portfolio also generated a negative return of -1.3%. Good returns from direct property  failed to compensate for losses from the listed property allocation, according to the scheme.

The funding ratio has increased to over 136% thanks to rising interest rates, placing the UWV scheme 15 percentage points above the 121% minimum cover ratio set by the pensions regulator De Nederlandsche Bank.

That said, the fund has decreased the required minimum cover ratio by over 4 percentage points by mitigating its interest rate risk through swaps.

Pensioenfonds UWV also strategically hedged approximately 50% of its equity and commodity positions in main currencies, which contributed 1% to absolute returns, it said. Non-euro investments in its fixed income portfolio were fully hedged at that time, the fund added.

The fund also indicated it is planning to study inflation risk and improve risk management on nominal and real matching.

It granted its 19,515 active participants indexation of 2.57%. The pension rights of its 19,800 deferred members and 7,820 pensioners were raised by 1.19%.

All UWV's assets are managed by external managers while TKP Pensioen is the scheme's pension provider.

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