NETHERLANDS - Three of the largest Dutch pension funds have lost investment returns because their interest rate hedges performed negatively in 2007.
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PGGM, renamed Pensioenfonds Zorg en Welzijn, suffered losses through equities and alpha strategies, but still finished 2007 up €7.2bn (US$11bn) on the previous year.
The fund saw its total assets under management remain at the levels they reached at the end of Q2: €88.2bn.
However, the annual report said: "The higher long term interest rate (yield) in 2007 translated into a negative result on the liability hedge, which cost 2.2 percentage points in cover ratio."
A spokesperson for another Dutch giant, ABP, said during the second half of 2007, the interest rate risk in the balance sheet had been partly hedged in the investment portfolio by extending the duration.
"Due to the rise in the interest rate, the effect of partly hedging the interest rate on return was negative for the year 2007," said the spokesperson.
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