US - The Pension Benefit Guaranty Corporation (PBGC) has awarded three investment management firms fixed income mandates worth US$7.5bn.
Prudential Investment Management LLC, Wellington Management Co. and Western Asset Management Co. will manage the fixed income investments on behalf of the federal insurer. The breakdown of the total sum to be invested was not disclosed.
“These firms will implement PBGC’s new investment strategy, which focuses on sound risk management through better matching of assets and liabilities,” said PBGC executive director Bradley Belt.
Each firm will carry out an actively managed fixed income strategy with a primary objective of “constructing a portfolio whose volatility tracks the volatility of PBGC’s liabilities”, the PBGC said. The secondary objective is to earn excess returns over PBGC’s liability discount rate.
The new appointments bring the total number of asset managers employed by the federal insurer to 10.
PBGC assets, totalling about US$40bn at the end of fiscal year 2004, are divided between a revolving fund for premium revenue, which is invested in treasury bonds and a trust fund for assets acquired from failed pension plans.
Short-term cash holdings in the revolving fund are managed internally by the PBGC, with all other discretionary investments managed externally. The managers are selected based on performance, expertise and expense.
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