NETHERLANDS - The €5.1bn pension fund of steelworks Hoogovens/Corus has managed to keep its funding ratio almost unchanged despite the market turmoil during the first six months, thanks mainly to the positive effects of its inflation hedge.

While returns on investments were down a fraction at -0.1%, the scheme's funding ratio at the end of June was still 135.5%, which is considerably above its required minimum of 116%, Stichting Pensionfonds Hoogovens reported.

That said, Hoogovens pension plan's real cover ratio, which takes compensation for inflation into account, decreased by 5% to 99.5%, which could mean members will receive a discounted indexation over 2008.

The pension fund's liabilities-matching portfolio returned 8.6% by following interest and inflation moves through the deployment of liquid assets, fixed income loans as well as interest and inflation derivatives.

The matching portfolio contained €2.4bn of fixed income investments, representing 46% of the scheme's total assets.

"At present, inflation risk has been fully hedged through interest and inflation swaps," a spokesman told IPE.

That said, Hoogovens' returns portfolio - important to the development of its real funding ratio - generated a negative return of -6.6%, as its 21% allocation to equity assets created a negative yield of -15% and its 11% allocation to fixed income investments returned -3.4%.

The scheme's combined allocation of 11% to real estate and infrastructure yielded 2.9%, which the spokesman mainly attributed to direct investments in Dutch commercial property.

The return portfolio's ‘other investments', mainly applying absolute return strategies, also delivered a negative return of -0.9%, the pension fund made clear.

The Stichting Pensioenfonds Hoogovens introduced its matching and returns strategies in 2004, in order to achieve a transparent link between investments and liabilities.

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