NETHERLANDS - Interest swaps created a negative return for SPW, the  €4.6bn industry-wide pension fund for the housing corporations, in the second quarter of the year, even though equity elsewhere returned well over the benchmark.

Returns of the Stichting Pensioenfonds voor de Woningcorporaties (SPW) were 2.6%, which is 0.7% over the benchmark, thanks mainly to returns of 8.4% on its equity investments, the pension fund said in its second-quarter report.

However, interest swaps set up to hedge against exposure of its liabilities caused a negative contribution of -3.2% and this in turn led to a negative return of -0.6% for the whole portfolio.

A further breakdown of the scheme's asset allocation also reveals fixed income, property and commodities generated negative yields of -1.2%, -2% and -1.8% respectively but hedge funds and private equity returned 2.3% - more than twice the benchmark - during the second quarter.

During the first-half, SPW reported total returns on investments hit 4.9%, albeit they were also affected by a negative result on interest swaps of -4.1%.

Nevertheless, SPW's funding ratio rose to 148%, mainly thanks to rising market interest rates, and despite the scheme incorporating a higher life expectancy into its liabilities, it pointed out.

Under the new financial assessment framework (nFTK), a coverage ratio of over 130% allows for a full indexation. In February, the scheme granted its 32,100 active participants a total indexation of 5.94%.

SPW's 17,200 deferred members and 11,000 pensioners were granted an indexation of 3.35%. At the same time, SPW decreased the contributions by 1% as of 1 January.

SPW is an independent scheme which has contracted out its administration to €25.5bn pensions provider and asset manager Cordares.