NETHERLANDS - The €2.8bn pension fund PNO Media saw its cover ratio rise to 100.9% during the third quarter of this year, thanks to a 10.1% return on investments.

Like many other Dutch pension funds, equities was PNO's best performing asset class as it delivered a 14.9% return in three months to the end of September, and lifted the equity return for this year to 25.9%.

A considerate drop in credit spreads also produced a 5.4% return on the pension fund's fixed income investments, leading to a total of 12.8% so far, it said.

Officials noted the most recent performance of the investment portfolio means the Hilversum-based scheme is already 12.5 percentage points ahead of the targets set out in its recovery plan.

At the end of 2008, PNO Media's cover ratio had fallen to 88.4% - substantially below the 105% minimum funding level set by pensions regulator De Nederlandsche Bank - and then dropped to 83.7% by the end of February 2009.

Alternative investments have disappointed and delivered a -1.2% return so far this year, although the sector did generate 2.6% in the third quarter of this year.

Property, infrastructure and private equity produced returns of 4.7%, 1.8% and -1.3% in three months, according to the pension fund.

Despite the strong gains in the main asset classes, Edgar Eijking, the fund's investment manager, said its overall return of 11.6% so far this year has been negatively affected by its 50% hedge against interest risk - managed via swaptions - as this has cut 2.7% of the results.

"Since the start of the year, the 30-year swap rates has gone up by 0.4% to 3.9%," said Eijking, who also pointed out that there was a 1.7% positive effect from the hedge during Q3

"Given the present interest rates, we are not planning a change in our hedging policy," added Eijking.

PNO Media also has fully hedged its currency risk in dollars, sterling, yen and Swiss francs.

By the end of September, the scheme had allocated 36.4% of its assets to equities, 41.9% to fixed income and 21.7% to alternatives, while its strategic asset allocation to these classes was 36%, 39% and 25% respectively.

The industry-wide pension fund has 380 affiliated employers and just under 15,000 active members along with 14,370 deferred members and 6,575 pensioners.

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