NETHERLANDS - ABN AMRO is to sell part of the credit risk on its loan book to PGGM using a Collateralised Loan Obligation (CLO) structure.
A first transaction was executed under the partnership on 8 December 2006, and PGGM said in a release today: "The CLO references a loan portfolio of €15.5bn notional... and under the transaction, PGGM shares in the credit risk of the loan portfolio by participating in the equity and mezzanine tranches of the CLO."
Piet Roelandt, director portfolio management at PGGM, said the deal would allow the €74.4bn fund to gain access to an asset class that was efficient from a risk-return perspective and had the additional benefit that it further diversified its asset allocation.
"This is an effective way of investing in a loan market which thus far has been difficult to access through the public markets in a size that is meaningful for PGGM. This deal helps to achieve our goal of having a better diversified overall portfolio," said Roelandt, who added that being closely involved in the structuring of the transaction allowed the fund to optimise those effects.
ABN AMRO stressed the agreement to transfer part of the risk of ABN AMRO’s loan portfolio should been seen against the backdrop of a history of transactions in which ABN AMRO has securitised parts of its loan portfolio. According to the firm, the objective of such transactions was to enhance its capital management capabilities and allow for an optimal capital deployment strategy.
"Individual transactions under the partnership with PGGM will initially be structured so that they are efficient under Basel I and Basel II," the firm said in a release.
Hugh Scott-Barrett, Chief Financial Officer at ABN AMRO, stressed the deal could be the first of a number of strategic steps in the firm's capital management, and added: “PGGM is our trusted partner with whom we have worked for many years... and we expect to conduct a number of transactions that will offer opportunities for both of us.”
An unnamed London-based employer has been hit with a £350,000 fine from The Pensions Regulator (TPR) for failing to fully comply with its pension duties.
XPS Pensions has enhanced its fiduciary management selection service in order to help trustees through initial selection and mandatory re-tendering.
One in five defined benefit (DB) schemes are in The Pension Regulator's (TPR) weakest two categories, analysis by Hymans Robertson has revealed.
State Street Global Advisors (SSGA) has been selected as the first index manager for the Asset Management Exchange's (AMX) passive funds.