EUROPE - Dutch pension funds have invested almost 25% of their combined assets in euro-zone government bonds, according to pensions regulator De Nederlandsche Bank (DNB).

During the first three months of 2011, pension funds increased their allocations, with €15bn of euro bonds on balance, taking their combined holdings to €161bn, according to the supervisor.

It also noted that, over the same period, pension funds lost €4.5bn on euro bonds due to falling markets.

Pension funds have, in part, invested in government bonds through funds for joint account (FJAs), tax-transparent vehicles established by the large pension asset managers.

Compared with the end of March 2010, pension funds' combined portfolio of euro bonds has risen by €30bn, the DNB said.

According to the regulator, Dutch schemes have mainly bought government bonds of strongly recovering countries, such as Germany, the Netherlands, France and Austria.

During the last five quarters, combined investments in government bonds for these four countries have increased by €48bn, representing more than two-thirds of Dutch pension investments in euro government bonds.

During the first quarter of 2010, the portfolio of euro bonds generated a net profit, whereas rising long-term interest rates caused a loss during the fourth quarter, as well in the first three months of 2011, the supervisor said.

It also said Dutch pension funds now owned almost €15bn worth of 'other' government bonds, particularly from the US.