NETHERLANDS - Pensioenfonds Zorg & Welzijn, the Dutch pension fund for care and welfare workers, has managed to hold onto the 100% cover ratio achieved by the end of May, thanks to a strong second quarter of gains in most asset classes.

Details of the €74.7bn pension fund's Q2 report show it achieved a return of 8.4% in the second quarter, reversing the losses felt in the first three months of this year, to give a cumulative return of 3.4% so far this year and lifting its cover ratio from 92% at the end of 2008 to 100% by the end of June. (See earlier IPE story: Equity bounce limited PfZW and PMT falls)

Officials at the fund had earlier revealed it had pulled back to a 100% cover ratio by the end of May, thanks in part to a rise in long-term interest rates. (See earlier IPE stories: PfZW recovers to 100%)

By the end of June, the long-term interest rate had risen from 3.55% at the beginning of the year to 3.98% - lifting both the returns earned by the pension fund and lowering liabilities in the process - and this contributed to a six percentage point gain for the cover ratio.

In contrast, the fund's interest rate hedge lowered the overall return by €1.2bn as rates rose.

Within the investment portfolios, equities saw the best overall gains while markets rallied and structured credits in particular saw a 24.3% gain in Q2 while listed equities returned 17.2%, to deliver a second quarter return of 15%.

At the same time, bonds have rallied well and high yield bonds, in particular, returned 12.6% over three months or 18.5% in the last three months, to help secure an overall return of 6.8% in the first half of 2009.

Commodities enjoyed a resurgence in the three months to the end of June as the oil price rose again from $50 to $70 a barrel. This lifted the cumulative commodities return to 11.9% so far this year, thanks to a 24.5% gain in Q2.

Elsewhere, however, real estate and infrastructure holdings took a further tumble and the sector is still down 0.8% this year, even though listed real estate made a strong 25% recovery in the second quarter. Infrastructure has returned -9.4% year-to-date while private real estate has lost another 4.9% (of which -3.8% came from Q2) - a problem which officials say is "partly as a result of the method used to value investments" which meant the asset classes "lagged behind those on marketable investments".

Inflation-linked bonds also rose 3.6% in Q2 or 4.3% in six months on increased inflation expectations, as seen in the bond markets, while PfZW's portfolio of strategies tactics have contributed 1.3% so far this year.

According to its own data analysis, PfZW was projected to return an average of 8.1% per annum since its inception in 1971 but has instead returned just 4.6% a year as a result of the recent market turbulence.

Peter Borgdorff, managing director of PfZW, said: There is still a long at to go to restore a healthy level of solvency in the pension fund, but we are pleased that the cover ratio is back at around 100% due to the higher return and the rise in long-term interest rates."

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