NETHERLANDS - The €111bn healthcare scheme PFZW has joined a growing list of Dutch pension funds facing rights cuts in 2014 if its funding fails to improve from this year.

During the scheme's annual report presentation, director Peter Borgdorff said: "Because our coverage ratio remains almost continually at 96-97%, we might not achieve our recovery target of 105% at year-end.

"The year 2011 has been a very strange one, as our assets increased by more than €11bn on the back of a result of 8.4%.

"However, this gain was more than off set by decreasing interest rates, on balance resulting in a funding decrease of 7 percentage points."

PFZW said it benefited from stability-increasing measures, such as raising its allocation to high-yield bonds, property and infrastructure, at the expense of listed equity.

These asset classes offset the 7% loss on equity markets, cutting the loss on securities to 1.6%, it said.

The healthcare scheme attributed the 6.2% loss for its liquid equities portfolio mainly to emerging markets, but made clear that almost all equity sub-classes contributed to the negative result.

PFZW's private equity investments generated 5.3%.

The scheme said it increased its focus on emerging markets to improve the geographical spread of the investments, as well as its risk/return profile.

It added that it made a co-investment in hospitals in Eastern Europe, and that it had invested €20m in a separate care mandate last year.

The pension fund attributed the 4.6% loss on its listed property holdings to the European debt crisis and worries about the Chinese economy slowing down.

With a positive return of 5.7%, private property benefited from high cash returns and increasing demand for high-quality property in Asia Pacific and the US.

PFZW's mezzanine portfolio was the best performer, returning 11%, thanks to operational improvements in the companies in which it had invested, resulting in positive revaluations.

By contrast, the healthcare scheme lost 13% on its real assets investments, "mainly following a negative contribution from the emission reduction rights fund and a decreased valuation of a listed agricultural company".

PFZW also reported that its investments in high-yield US credits returned a disappointing 2.9%, adding that it had replaced the asset manager as a consequence.

Borgdorff said the scheme's administrative costs per participant (€80) were set to decrease, as it was planning to increase participants' involvement - by allowing them to fill in forms online, for example.

He added that the scheme's asset management costs were 0.55% in 2011, but stressed that this figure did not include transaction costs, estimated at 0.14%.

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