The five largest pension funds in the Netherlands saw first-quarter returns largely wiped out over the second quarter, due to rising interest rates and market volatility.
Over the period, the drop in liabilities far exceeded investment losses, resulting in a significant strengthening of coverage ratios.
However, the recently announced reduction of the ultimate forward rate (UFR) – included in the discount rate for liabilities – undid a sizeable part of funding increase.
Funding at the €356bn civil service scheme ABP rose by 5.6 percentage points to 102%, rather than by 7.5% to 103.9%, due to the effect of the UFR change.
BpfBouw, the €48bn pension fund for the building sector, said the amended UFR had come at the expense of 3.1 percentage points of funding improvement.
Its coverage now stands at 111.4%.
ABP reported a second-quarter loss of 4.3%, almost halving its year-to-date result.
Equity lost 2.9%, while fixed income lost 4.6%.
It also lost 2.3% on its combined hedge of interest and inflation risk.
For ABP, private equity (3.6%), commodities (3.5%) and infrastructure (1.2%) were the only asset classes to produce a positive return over the period.
PFZW, the €166bn healthcare scheme, reported a 3.2% loss on equity and an 8.7% loss on government bond holdings.
Overall, the scheme lost 6.6% on investments over the second quarter.
Inflation-linked bonds, credit and high-yield/emerging market debt returned -4.2%, -3.1% and -3.4%.
Rising oil prices pushed up returns on commodities to 6.6%, while private equity and infrastructure also produced positive returns of 2.8% and 1.9%.
After factoring in the new UFR, PFZW’s funding now stands at 100%.
The €60bn metal scheme PMT posted a quarterly loss of 8.3%, due largely to a 12.9% loss on its 55% fixed income portfolio.
Its equity and property holdings also generated losses of 2.1% and 2.9%.
The scheme’s current funding stands at 100.2%.
Although BpfBouw incurred the largest quarterly loss (-9.9%), with a funding of 111.4%, it is still in the best financial position of the five largest schemes.
Over the second quarter, it lost 9% on its 65% interest hedge and reported losses on equity (-3.2%), fixed income -4.4%) and property (-1.4%).
PME, the €40bn scheme for the metal and electro-technical engineering industry, reported a quarterly return of -7.2%, including a 3.1% loss on its 50% interest cover.
It lost 6.4% on its 56% fixed income portfolio.
Equity and alternatives lost 1.6% and 3.3%.
With a return of 2.3%, real estate was PME’s only asset class to produce a positive return.
The scheme said its funding stood at 99.8%.