NETHERLANDS - Structured credit and inflation along with an interest rate hedging mandate helped drive Pensioenfonds Zorg en Welzijn (PfZW) to deliver a 5.2% return in the first quarter of 2010.

Latest figures from the pension fund for the care and welfare sector, published alongside the 2009 annual report, showed the cover ratio of the scheme increased from 108% at the end of December 2009 to 109% three months later.

Its cover ratio might have been higher as the combined effect of the investment return, hedging of interest rate risk and interest on the provision of pension liabilities improved the ratio by six percentage points. However, a decrease in long-term interest rates from 3.89% in January to 3.63% in March had a negative impact worth five percentage points.

The 5.2% first quarter return increased the industrywide scheme's assets under management from €86.1bn at the end of last year to €90.8bn by the end of March.

The overall equities portfolio, equivalent to 64.3% of the pension fund, produced a 4.4% return, while structured credit produced the best individual return of 12.2%, and infrastructure investments returned -2.1%.

The remaining asset classes all produced positive returns. The 7.2% of assets allocated to commodities returning 2.8% thanks to a rise in the oil price while the interest rate and inflation risk asset class, accounting for 28.3% of the total assets, returned 7.4% overall. Within this, the partial hedging mandate posted 10.1% as a result of a fall in interest rates, while the portfolio of other investments returned 0.5%.

The annual report meanwhile showed PfZW's cover ratio improved by 16 percentage points last year, from 92% at the end of 2008 to 108%, which "comfortably exceeded" the expected cover ratio of 96% for 2009. As the ratio passed the required level of 105%, PFZW granted partial indexation on 1 January 2010.

Peter Borgdorff, managing director of PFZW, said: "We are in considerably better shape than last year, that is certain. But we are not there yet; the recovery is still fragile. In 2009 we sought dialogue with our participants. This is something we are continuing to do, to explain the state of their pension and to hear their views. We are taking active part in the debate on the future of the pension system. Our aim remains to offer a good pension package at an acceptable price."

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