NETHERLANDS - The €13.4bn Dutch pension fund of electronics giant Philips returned 7.2% on its investments at the end of the third quarter this year.

The scheme saw its cover ratio rise by 4 percentage points to 126% during this period, which is almost 20% above its required funding ratio, officials said.

They attributed the improvement of the pension fund's position not only to the positive returns, but also to decreasing pension liabilities following a slight decrease in long-term interest rates.

To reach a balance between limiting investment risks and creating a long-term perspective for indexation, the Philips scheme has divided its assets into a liability-matching portfolio and a return portfolio.

Its 71% liability-matching portfolio - consisting of fixed income investments - returned 6.1% and exceeded its benchmark by 1.3 percentage points.

The combined investments in equity, property, commodities and hedge funds in its return portfolio delivered gains of just over 10%, which is slightly short of its benchmark.

The Philips pension fund has 18,120 active participants, 60,200 pensioners and 32,590 deferred members.

Elsewhere, the €4.4bn pension scheme of steelworks Hoogovens said its cover ratio rose 6 percentage points to 118% in Q3 2009.

Despite exceeding its required funding ratio of 115%, officials stressed that prudence remains necessary "as the recovery of the financial markets is still vulnerable".

Officials added: "Moreover, we are expecting liabilities to increase, as a consequence of rising life expectancy. Therefore, the measures of the recovery plan still need to be carried out."

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