NETHERLANDS - The Philips pension fund returned -3.5% during the fourth quarter of 2010 due to rising interest rates.
The Dutch electrionics giant's pension assets fell to €13.6bn ($18.4bn) from €14.3bn in Q3, bringing it closer to its Q1 and Q2 levels of €13.7bn and €13.6bn respectively.
The Dutch pension fund's investments are divided into two portfolios - a liability matching portfolio which focuses on controlling interest rate risk through bond investments and a return portfolio that seeks higher return through indexation and investments in equities, real estate, hedge funds and commodities.
The liability matching portfolio returned -6.8% against a benchmark of -6.6% during Q4, largely due to the rise in interest rates, which reduced the value of bonds. Meanwhile, the return portfolio yielded 5.7% - 0.2% higher than the benchmark thanks to investments in hedge funds and high yield corporate bonds.
The fund still managed to beat its legally required coverage ratio of 108% by one percentage point at the end of December 2010.
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