NETHERLANDS - The €1.952bn TNO Pensioenfonds has admitted it has had a bad start to the year, following a total investment return of just under 2% in 2007.

The pension fund of the applied scientific research institute has incurred losses since the beginning of the year "due to the continued negative trend on the financial markets", leading to a further reduction of its assets and a drop of its cover ratio to 126%.

At the end of last year, the fund's cover ratio went up from the 134% in 2006 to 139.7%, while TNO booked a 1.95% return, mainly as a result of a relative outperformance of private equity, hedge funds and real estate, according to officials.

"The decision to decrease the stake in listed real estate shares and to increase the hedge fund mandate, also had a positive effect."

The funds' €673m equity portfolio returned 2.3%, with emerging markets and Asian equities performing best at 30.6% and 20.6% respectively but Japanese equity dragged down the average with a negative return of -14.8%.

Private equity (€165m) returned 20.3%, while hedge funds (€116m) yielded 5.7%, "proving their diversifying character", according to TNO.

The €223m real estate portfolio lost 27.5% of their value due to the "bad sentiment in the US"; the portfolio returned -4.7%.

Lastly, also bonds had a negative return of 2.77%, due to a rise in the interest period structure and the rise in credit risks.

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