NETHERLANDS - Pensioenfonds Zorg en Welzijn (PZW) has reported losses of 2.9%, with returns on equities taking the biggest hit (-12.7%).
Its total investments fell by €2.5bn (US$3.9bn) to €85.8bn at the end of the first quarter.
Peter Borgdorff, managing director of Pensioenfonds Zorg en Welzijn, said: "The turbulence in the volatile financial markets had a major effect on our return and our cover ratio in the first quarter. Losses were, however, limited thanks to the diversity of investment risks. The current cover ratio provides sufficient buffer to weather the negative effects of the market. There is every reason to continue the current long-term policy."
PZW said it aspired to full indexation. A real cover ratio of approximately 100% was deemed necessary. This corresponded with a nominal cover ratio of approximately 150%. The real cover ratio was 89%.
The nominal cover ratio on 31 March 2008 stood at 137%, which is 11 percentage points lower than the figure on 31 December 2007 (148%), but still well above the required nominal cover ratio of 125%.
The fall in the cover ratio was due to a low return on investments, the pension liabilities is valued at the nominal market interest rate and the value of the liabilities rose in the first quarter of 2008.
However, PZW said its broad diversification in the portfolio bore fruit in the first quarter. The credit crisis increased the return on government bonds and inflation-linked bonds which benefited from a flight to safety. The liability hedge also made a positive return.
Negative returns were seen on the portfolio of corporate bonds and emerging market bonds.
The return on poorer quality bonds was slightly negative as a result of increasing risk premiums (-1.2%). Uncertainty in the financial markets also affected the portfolio of strategies (-6.6%), as certain arbitrage strategies came up against a lack of liquidity on the financial markets.
In contrast, commodities, real estate and private equity showed a positive return. Commodities earned a high return (+9.5%) as a result of the increase in oil and food prices. The returns on real estate (+1.7%) and private equity (+1.1%) were slightly positive. The return on infrastructure was slightly negative (-1.3%). This is because it is a relatively new investment which was faced with management costs but as yet not with revaluations.
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