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TNO scheme property returns 33.4%

NETHERLANDS - Property and private equity were the most profitable asset classes in 2006 for the pension fund of technical research institute TNO, the fund has stated.

The €2.1bn scheme more than tripled its investments in private equity to €129m - 6.5% of its total assets under management - it indicated in its annual report. Equity returned 11.4%, while fixed income yielded 0%, as a result of rising interest rates.

This helped to generate returns of 33.4% and 29.2% respectively in the two asset classes while the fund achieve total returns of 11.3% and its coverage ratio rose by 11% to 134%.

Since January 1 2007, the scheme has also paid an indexation of 1.2% but if the proposals for a change to a conditionally-indexed average salary scheme are accepted, an extra indexation of 1% will follow as of July 2007.

In order to improve risk management, the TNO scheme is considering the appointment of an external fiduciary manager to support strategic and tactical investment policy as its asset management are already contracted out.

And to comply with the new governance rules, the fund's board has developed plans for a participants council - consisting of six employees and four pensioners - to replace the present general meeting of participants, it announced.

Additional plans to create an accountability body of two employees, two pensioners and two employer's representatives, it stated.

The scheme is also considering getting its internal supervision carried out by a visitation committee of three independent members - a duty which the body must report at least once every three years.

At this stage, however, plans are subject to the approval of the pension fund's participants.

TNO's pension fund also said it will gradually scale down its healthcare contributions to its pensioners, "in line with national trends". Within five years, the present conditional contribution will be brought back to 0, it said.

Elsewhere, the €850m pension fund of building company Volker Wessels announced an indexation of 1.5% for its workers, and 1.2% for its pensioners and deferred members. The scheme has 9,800 participants. Its funding ratio was 121.4% at the end of 2005.

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