KLM’s three largest pension funds have reported negative third-quarter returns of up to 4.1%, while their coverage ratios fell by at least 10 percentage points over the period.

Their official policy funding – drawn from the 12-month average – also dropped by several percentage points.

Last week, the five largest pension funds in the Netherlands announced investment losses of up to 3.2% over the past three months, with only the €345bn civil service scheme ABP (0.8%) and the €39bn metal scheme PME (0.5%) managing to record positive returns year to date.

The KLM pension funds attributed their deteriorating financial position to a combination of negative returns, the reduction of the ultimate forward rate (UFR) for discounting liabilities and falling long-term interest rates.

The two rate developments in particular led to a significant increase in liabilities, with the €7.3bn Algemeen Pensioenfonds KLM, the scheme for ground staff, indicating that its liabilities had increased by 5.5%.

However, the €2.5bn pension fund for cabin staff, with a quarterly loss of 4.1%, took the biggest hit, resulting in its policy funding falling by 3.3 percentage points to 110.9%.

The Pensioenfonds KLM Cabinepersoneel cited a quarterly loss of 9.2% on its 42.5% equity allocation, as well as a 1.4% loss on its 44.5% fixed income holdings.

In contrast, the scheme’s real estate portfolio returned 0.6% over the third quarter, taking its year-to-date return for the asset class to 5.6%.

Mark Burback, CIO at Blue Sky Group, the KLM schemes’ asset manager and pensions provider, attributed the performance of real estate to investors’ preference for fixed income investments following the negative sentiments on financial markets.

The Algemeen Pensioenfonds KLM, meanwhile, lost 3.8% over the last quarter.

Commenting on the quarterly results, the scheme for ground staff said the volatile equity markets wiped out its expected annual result.

It said its policy funding fell by 2.4 percentage points to 112.8%, adding that indexation would be unlikely in the years to come.

The €7.8bn pension fund for cockpit staff – despite an investment loss of 3.9% and a 1.8-percentage-point drop in policy funding to 123.9% – remained in the best shape of the three large KLM schemes.

The Pensioenfonds Vliegend Personeel said it still had a funding surplus and did not need to submit a recovery plan.

The pilots’ scheme announced a positive return on investments of 0.6% year to date, while the pension funds for cabin and ground staff incurred losses of 1.4% and 1%, respectively.