NETHERLANDS - The €5bn pension fund for medical consultants SPMS saw its cover ratio rise by almost 20 percentage points last year on the back of a 17% return.

The scheme was able to keep its funding ratio at 117.4%, after granting its participants the agreed 3% unconditional indexation, officials said in its preliminary figures for 2009.

Jeroen Steenvoorden, the scheme's director, attributed the results to a timely rebalancing of its investment portfolio and an increased allocation to equities.

The equity and fixed income portfolios were the main contributors to the €600m rise of the pension fund's assets in 2009, he said.

Hedge funds performed also performed well, yet property delivered a negative return, although a full breakdown of asset class returns will not be published until later in the year, according to Steenvoorden.

That said, he indicated investments performed very well in December last year, when the scheme's cover ratio rose by 5.7 percentage points.

SPMS's strategic investment mix currently consists of 34% equities, 39% fixed income and 15% property, with hedge funds and commodities holdings worth 10% and 2% respectively.

Steenvoorden said the pension fund for medical consultants had also benefited from increasing long-term interest rates, as an increase from 3.6% to 3.9% in 2009 led to decreased liabilities.

Despite rising long-term interest rates and a 65% hedge on its interest rate risks, the scheme still managed to generate a positive return on all of its hedges. These included currency hedges as well as a hedge against the difference between the interest rate curves of the US dollar and the euro.

Steenvoorden said SPMS has also been setting aside 0.5% of its assets each year since January 2008, in a bid to tackle the financial burden of increasing life expectancy. This in addition to the predicted five-year age increase, which has already been taken into account.

"Medical consultants are living longer than the average Dutch employee," the director explained.

The cover ratio of SPMS fell from 146% in 2008 to 98% in March 2009 so a recovery plan had to be submitted explaining how officials would achieve full restoration of the pension fund's required financial buffers at 124%.

The medical consultants' scheme, which has 7,200 active participants, 5,700 pensioners and 1,300 deferred members, returned -16.2% in 2008.

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