NETHERLANDS - Provisum, the €900m pension fund of retailer C&A, managed to sustain a cover ratio of over 120% by the end of last year, thanks mainly to its comfortable starting position.

The scheme reported overall returns of -18.1% for 2008 but its required reserves equalled a cover ratio of 121.5% by the end of December as the scheme had built up a funding ratio of 177.5% by the end of 2007.

Looking specifically at its returns, however, the pension fund fell 4.4% short of its benchmark, and lead to an average return of 2.5% during the past five years.

The drop in cover ratio was largely caused by the decreasing value of investments - dragging the cover ratio down 37.1% - along with the fall in long-term interest rates which lowered its cover ratio by another 27.1%, Provisum said.

It has decided to grant its 4,030 active participants a salary index-based indexation of 3% and its 6,175 deferred members saw their pension rights increased by 2.78%, following the consumers' index.

That said, given the reduced cover ratio, Provisum also said the discount granted in 2008 on the costs-covering contributions cannot be continued this year.

With returns of 2.3%, the 45.6%-fixed income allocation was the highest yielding asset class, proving its value as a buffer for the entire portfolio during hard times, according to officials.

Equity returned -42%, while its allocation decreased by 6% to 26.8%, mainly because of falling markets, they noted.

Provisum's 17.1% allocation to property also yielded -1.6% which, in the scheme's opinion, also helped to cushion the overall returns. Over 70% of this sum was invested in direct real estate, while the remainder was allocated to unlisted indirect property.

Hedge funds, which amounted to a 7.4% allocation of funds, yielded -16.5%.

And officials claimed its 2.1% investment in global tactical asset allocation returned -19.2%, it did contribute to the diversification of the overall portfolio.

Anticipating a new asset-liability study and continuity analyses for an integrated policy on investment, contributions and indexation as of 2010, Provisum will base its investments on a dynamic asset mix with an increased focus on fixed income, in case its cover ratio decreases further, officials indicated.

This dynamic approach will allow a maximum fixed income allocation of 65%, whereas the bandwidth for equity has been set at 15%-33%.

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