NETHERLANDS - The €2.8bn pension fund PNO Media saw spectacular returns of 41.4% on its investment in commodities in the first half of this year, but it was not enough to prevent the fund from falling below the minimum required cover ratio.

Overall negative returns reached -5.2%, the industry-wide scheme revealed in its figures over the first half of 2008, mainly because of the decreasing equity markets.

PNO Media's equity portfolio - counting for approximately 38% of its assets - generated a negative return of -13.3%, while its 39.6% allocation to fixed income also performed negatively with a result of -1.3%.

PNO Media's other asset classes - property, private equity and infrastructure - fared better and returned 2%, 3.2% and 2.2% respectively during the same period.

The scheme's cover ratio dropped 5.2% to 116.4% by the end of June 2008, which is below the required minimum of 119% set by regulator De Nederlandsche Bank and based on the fund's specific investments risks.

"If the policy set out in our recovery plan is carried out consistently, we expect to have reached the required funding ratio within two years," said PNO Media officials.

That said, as things are now, the pension fund believes it will not be able to grant compensation of more than 50% for the impact of inflation.

That said, monthly risk analysis has shown financial buffers are sufficient to also cushion future drops in both interest rates and equity, PNO Media stressed.

"Even in the extreme situation of an interest rate drop of 1%, in combination with an equity decrease of 30%, our cover ratio will remain above 100%," it pointed out.

PNO Media granted an indexation of 4% on 1 January 2008, which covered the inflation growth of last year as well as approximately 50% of the overdue indexation.

The industry-wide pension fund has 15,470 active participants, 13,325 deferred members and 6,025 pensioners and has 359 affiliated employers.

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