mast image

Special Report

Impact investing

Sections

EDS makes the euro switch

Global IT services company Electronic Data Systems (EDS) co-ordinates its benefits operations for 30,000 European employees from its Belgian offices in Brussels. As Paul Kellerd, European benefits manager at EDS, explains, the euro has been a definite catalyst for change within the company’s European pension and investment arrangements.
“EDS set up its European pensions arrangements in 1996, and the investment strategy was developed in consultation from our corporate treasury headquarters in Texas.
“From the outset the investment policy has been very pro-equity, with, for example, a 70% holding in our Belgian pension fund, much higher than most Belgian funds.
“In the UK, though, we are 100% invested in equities, and in the Netherlands equities only constitute 30% of the portfolio – so there is no overall strategy. Rather the benchmarks are tailored to the specifics of the country. It is a combination of the type of liabilities, the fund level, particular regulatory environments and finding an appropriate investment regime within that.”
For plan arrangements, Kellerd comments that the company’s watchwords are flexibility and focus on the individual employee.
The company runs both DB and DC schemes, depending on the country it operates in.
Belgium has a DB plan and the fund currently stands at Bfr300m, with the 70% in equities complemented by 30% in bonds.
However, from April 1 the Belgian fund will be switching its domestic assets entirely into European assets, with a euro-zone in/out divide alongside a global equities approach and euro-zone and global bonds.
According to Kellerd the fund still holds the 15% in domestic ostensibly required by Belgian authorities, although expectations are that this will soon be abolished in line with EU law.
“Basically, most of our pensions liabilities have now transferred into euros, so it is essential that our investments reflect this to ensure we are operating economically.
“For countries like Switzerland we are also moving to a European benchmark, because the consensus is that the markets will only converge more in the future.”
At present, EDS has no preferred investment provider arrangements, although Kellerd comments that should a manager fail to perform on a brief in one country it is unlikely it will receive another elsewhere.
The company’s new European investment strategy will undoubtedly involve rationalisation in the number of asset managers used by EDS, he says.
And in terms of mobile employees EDS attempts to keep them in the home country schemes as far as possible, at least where the assignment is of a temporary nature.
“We also have a supplementary retirement plan on top of various home schemes to provide a top-up in the event of any shortfalls an employee may incur by switching schemes, which is entirely company-sponsored,” says Kellerd.
While discussions on the possibility of a pan-European pensions initiative are obviously interesting to a company with EDS’ diverse liabilities, Kellerd says he feels such a scheme is still a long way off.
“This is not a top priority here at present, because the proposals are still vague and look like taking many years before anything comes to fruition. But as everyone acknowledges, for a business like ours it would be an enormous bonus,” he says.

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2558

    Asset class: Private Equity.
    Asset region: Global or Swiss.
    Size: USD $5-10m.
    Closing date: 2019-08-20.

  • QN-2559

    Asset class: Multi Assets.
    Asset region: -.
    Size: EUR 15m (may be split into two mandates EUR 7.5m).
    Closing date: 2019-09-06.

  • QN-2560

    Asset class: Private Equity.
    Asset region: Global.
    Size: $40m.
    Closing date: 2019-08-30.

  • QN-2561

    Asset class: Infrastructure.
    Asset region: Global.
    Size: $40m.
    Closing date: 2019-08-30.

Begin Your Search Here
<