NETHERLANDS - Private equity and equity were the best performing asset classes last year for TNO, the €2.2bn pension fund of the Dutch technical research institute, returning 26.2% and 19.8%, respectively.

The scheme's preliminary figures showed that its investments in hedge funds and fixed income returned 7.7% and 5.3%, respectively, contributing to an overall result of 12% for 2010.

Indirect unlisted property delivered a slightly negative result of -0.1%.

Following a drop in interest rates, TNO's 75% strategic hedge against the interest risks on its liabilities accounted for 4.9% percentage points of the scheme's performance, officials said.

In contrast, the scheme's decision to passively hedge 60% of the risks on the main foreign currencies caused a loss of 1.6% due to a rise of the US dollar.

In the previous year, its currency hedge generated a positive result of 0.3%.

The Pensioenfonds TNO saw its coverage ratio drop from 110.4% at the end of 2009 to 108.3%, after having discounted a total of 9 percentage points for increased longevity.

The scheme's funding target in its long-term recovery plan is 112%.

Based on its risk profile, the pension fund's required financial reserves equate to a cover of 122%.

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