NETHERLANDS - The €545m (US$769m) Stichting Pensioenfonds Siemens has raised the prospect of joining the €18.7bn industry-wide pension fund PME, but deliberations stalled when the fund's coverage ratio fell to 90%, MandateWire reported. In the meantime, State Street Global Advisors and Dimensional Fund Advisers have been appointed to handle new equities briefs.
The scheme considered joining the Bedrijfstakpensioenfonds voor de Metalelektro (PME) following an investigation into different strategic options last year.
However the potential union had to be adjourned when the coverage ratios of both funds fell below 105%, making implementation of such a move difficult, a source at the fund said. The source confirmed that the idea was motivated by the financial turmoil and remains a serious and concrete option.
The drop in funding ratio also motivated the fund to sell the property portfolio it held with BlackRock, although the manager remains in charge of an equities mandate. ING Investment Management still has a small bonds portfolio, but is set to disappear from the scheme's manager roster, the source said.
In April 2009 the fund restarted the implementation of the new mandate structure it first decided to employ last year, awarding an emerging markets equities mandate to State Street and an equities brief to Dimensional.
Based on the results of a supplementary ALM study it conducted in 2008, the scheme also decided to cover 80% of its interest rate risk. It decided to sell an existing swap from 2006, and to replace it with five new swaps, worth €54.5m to better match the duration and the size of its liabilities. At the same time the fund chose to install a fixed income portfolio consisting mainly of corporate bonds. The corporate bonds generated negative returns and the swap was not sufficient to reach 80% coverage.
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