NETHERLANDS - The €266m Dutch pension fund of energy company Total saw its coverage ratio increase to 101.7% in 2010 - 2.5 percentage points short of its required funding.

However, its cover at year-end was 6.7 percentage points ahead of its recovery target, according to its annual report.

Meanwhile, the scheme's funding recovered further to 104.6% at the end of June, a spokeswoman said.

Last year, the pension fund narrowly avoided a benefits cut after its funding dropped to 97% in August.

The Stichting Total Pensioenfonds Nederland reported returns on investments of 13.3%, beating its benchmark by 1.6 percentage points.

It attributed the result mainly to its overweight position in rising equity markets at the expense of its fixed income allocation.

The scheme said its 47% equity portfolio returned 19.4%, adding that it had refocused to spreading equity risk over regions from theme-based investments.

Its 47% fixed income holdings returned 10.3% due to an overweight allocation to emerging market bonds and US high-yield corporate bonds, at the expense of governments bonds and worldwide inflation-linked bonds.

It attributed its real estate portfolio's 12.8% return to investments focusing on Asian indirect property.

Last year, the pension fund appointed Blue Sky Group as its fiduciary asset manager, but decided to keep the characteristics of its investments unchanged.

The Total scheme said it raised the interest hedge - through AAA bonds and interest swaps - to 75% of its liabilities and that it would consider interim rebalancing if the cover rises above 80% following interest rates movements.

In addition, it has almost fully hedged the currency risk of its contracted out asset management.

Due to its financial situation, the pension fund refrained from granting any indexation last year.

The Total scheme has 1,275 participants and six affiliated companies, including Combined Refueling Services and Mafina.

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