SCHIPHOL, 13/07/06 - Pension fund ABP, one of the world's largest institutional investors, lost 1.5 percent on the value of its investment portfolio in the second quarter. ABP manages the pensions of Dutch civil servants. Its total invested capital shrank to 194 billion euros from 196.3 billion at the end of the first quarter.

The decline is almost completely due to depreciating stock values in emerging markets, ABP said yesterday. Despite the lower returns, ABP saw its coverage ratio (the yardstick indicating to what extent a fund can meet its obligations) increase by 1.7 percentage points to 133 percent. The obligations declined by 3.8 billion euros due to rising interest rates in the reporting period.

ABP has become gloomier on the world economy than three months ago. "It is by no means certain which direction will be taken. The increased uncertainty has led to greater volatility on financial markets in the second quarter. We expect this to continue in the coming months," the fund predicted.

Another large Dutch pension fund, PGGM (health sector) announced yesterday it lost 0.8 percent on its investments in the second quarter, attributed to "turbulent markets." Nonetheless, the total value of its assets expanded by over 1 billion euros to 74.5 billion euros from the previous quarter, among other factors because the pension fund could add contributions from participants monthly.

Investments in bonds and certain stock markets performed worst, said PGGM. Investments in assets such as property and private equity did end in positive territory. PGGM's coverage ratio rose to 133 percent from 130 percent at the end of the first quarter.

PGGM's yield on its investments in the first half was 2.9 percent, due to its strong results on investments in the first quarter. Over the first half, ABP also still booked growth of its yield - of 1.4 percent.