NETHERLANDS - The €5bn pension fund of steel works Hoogovens managed to keep its funding ratio safely above the required minimum of 115% during the third quarter of this year, despite the turbulent market conditions.

Despite its cover ratio dropping to just over 127% by the end of September, as well as a further deteriorating situation in October, the nominal cover ratio has never hit the level of the scheme's required buffers, the scheme reported.

The Hoogovens scheme also managed to limit its investment loses to -1.2% during 2008, attributing the result to its hedging of a large part of both interest risk and inflation risk, as well as a limited equity exposure worth just 18% of the portfolio.

Hoogovens' matching portfolio - aimed at covering its liabilities - returned 16.1% so far this year, thanks to a drop of long-term interest rates in combination with the hedge of the inflation risk, Harry Lensen, CFO of the scheme, pointed out.

The matching portfolio consists of 50% of the scheme's assets, which have been fully invested in fixed income.

However, the pension fund's return portfolio - crucial for the scheme's ability to grant indexation - showed a negative total yield of  -14% and, as a consequence, the pension fund's real funding ratio has decreased to 94.3% at quarter-end, officials indicated.

The results on the return portfolio were affected mainly by the performance of its equity investments, which have negatively returned -26.8% so far this year, officials stated.

With a result of 2.6%, the 11% allocation to property and infrastructure was the only asset class within the return portfolio which showed positive results.

Fixed income and hedge funds yielded -7.8% and -8.2% respectively, according to the Stichting Pensioenfonds Hoogovens.