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IPE special report May 2018

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TNO pension fund reaps benefits of falling interest rates over Q1

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The €2.6bn pension fund of TNO has said it benefitted from falling interest rates over the first quarter, resulting in an overall return of 3.86%.

As a consequence, assets under management increased by €86m, while funding improved by 1.6 percentage points to 111.7%. 

The scheme’s 55.5% fixed income allocation generated a return of 3.74%, which directly affected its assets, it said.

At the same time, the falling interest rate only resulted in a limited decrease of the discount rate, following the three-month average mechanism.

In addition, the pension fund’s 55% hedge of the interest risk of its liabilities delivered a return of 1.33%, also due to the fall in rates.

The pension fund of the institute for applied technical research reported a 1.03% return on its 26.5% equity allocation, adding that its 3.8% property holdings – mainly retail and residential property through non-listed funds – produced a positive result of 1.33% over the first quarter.

In contrast, private equity – making up 7.3% of the scheme’s investment mix – generated a loss of 0.54%, chiefly due to a re-valuation at 2013-end, the scheme said.

Its full hedge of liquid investments in the main currencies contributed -0.08% to the quarterly result.

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