NETHERLANDS - Private equity was the best returning asset class of the €12bn railways pension fund SPF, as the sector delivered 27.7% last year.

The industry-wide scheme returned 5%, after currency-hedging, during 2007, the pension fund has reported.

Full hedging of the main foreign currencies, excluding emerging markets, resulted in returns of €307m, thanks to the falling US dollar, according to its officials results.

Equity and fixed interest investments yielded 5.2% and 0.2% respectively but as a matter of policy, the railways scheme chose not to invest in hedge funds, in part because of the high costs involved, and do not invest in commodities in 2007 or in the previous year.

While SPF's direct property portfolio returned 13.2%, its already downsized indirect real estate portfolio lost 16.8%.

The scheme's investments in emerging markets debts also yielded 3.25% and as a results of an asset-liability study, SPF is increasing its present allocation from 2% to 5% of its assets, the scheme made clear.

The pension fund has already completed the extension of its strategic fixed interest portfolio - designed to hedge interest risks - to 10%.

During 2007, SPF further extended its new ‘opportunities portfolio' - consisting of infrastructure, global tactical asset allocation, a climate awareness bond, micro finance funds and a bio-diesel project - to 1.2%, as part of the planned increase to 5% of its assets.

That said, this portfolio yielded negative returns of -12.9%, because of bad results within its global tactical asset allocation (GTAA), the scheme pointed out.

Based on a market interest rate of 4.8%, SPF's coverage ratio rose to 189% during 2007. However, a 0.2% interest rate drop, combined with the market turmoil, caused a decrease of the funding ratio to 174% in the first quarter of 2008, the pension fund said.

The railways scheme granted an indexation of 2.27% and 1.33% over 2007 and 2006 respectively.

SPF is a non-mandatory industry-wide scheme with 29,000 workers, 20,500 deferred members and 24,000 pensioners. It has over 60 affiliated companies and SPF's pension provider and asset manager is SPF Beheer.

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