NETHERLANDS - The deepening credit crisis seriously affected assets of the Dutch metals pension scheme PMT during the first quarter of this year, producing negative returns of -4.4%, as well as a €1.6bn drop in assets to €32.9bn.

The scheme's cover ratio also dropped from 141% to 128%, thanks mainly to the decreasing long-term interest rates, PMT announced today.

According to the pension fund for metalworking and mechanical engineering staff, its equity and high-return investments delivered a negative yield of -13.6%, alongside -0.8% for fixed income, not just following the drop in equity markets but also because increased credit spreads had caused high-yield bonds to lose value.

PMT's investments in alternatives - commodities, hedge funds, private equity and infrastructure - as well as in non-listed international property, delivered positive returns. That said, the total yield was just 1.3% in total, compared with returns of 25.3% last year.

Inflation-linked bonds yielded above average returns of 2.5%,, the scheme said, while direct Dutch property investments also performed well.

Because PMT's investments are fully hedged against the US dollar, the drop of the currency also delivered extra returns worth almost €1bn, it added.

In response to market developments, PMT has increased its fixed income allocation from 39% to 43%, mainly at the expense of its equity portfolio which decreased by 5% to 30%, it made clear.

The scheme also increased its investments in alternatives from 13% to 14%, ahead of its strategic allocation of 15%.

The industry-wide pension fund PMT is the largest market scheme in the Netherlands, with over a million participants and over 33,000 associated companies.