The pension fund of the Dutch financial group ING has outsourced the lion’s share of its €26bn in assets, awarding investment mandates for its nearly €20bn matching portfolio to AXA Investment Management and BlackRock.

The two asset managers will each take on half of the matching portfolio, involving around €10bn in assets.

It is the largest institutional contract win in the Dutch market this year, according to AXA IM.

Hanneke Veringa, head of the client group in the Netherlands for AXA IM, said: “Pensioenfonds ING was facing the same material challenges of most Dutch institutional investors in optimally hedging its interest-rate and inflation risks with the fixed income portfolio.”

Julien Fourtou, the firm’s global head of multi-asset client solutions, said AXA IM was now busy helping other institutional investors benefit from its balance sheet management experience. 

“We will further expand this service to those facing similar constraints, where both funding and regulatory objectives must be met in a cost-efficient manner, while ensuring the boards of the pension funds remain in full control,” he said.

The ING mandate applies to the closed-end defined benefit (DB) pension fund, AXA IM said.

The ING Pension Fund said it conducted an extensive selection process before signing deals with BlackRock and AXA IM.

“Outsourcing allows for further improvement and expansion of knowledge, expertise and continuity,” the pension fund said.

While this outsourcing concerned the matching portfolio, the pension fund said its return portfolio – which focuses on creating an adequate return for pensions indexation – had already been outsourced. 

Reporting on the investment and currency risk management is outsourced to the pension fund’s strategic partner Cardano, it said, adding that the treasury portfolio continues to be run by Florint Capital.

Stressing that investment policy was not changed by the outsourcing, and that the pension fund itself retained control, the ING Pension Fund said it was, “looking forward confidently to a fruitful collaboration” with BlackRock, AXA, Cardano and Florint Capital.

AXA IM said pension funds and insurance companies were now facing the challenge of a low-yield environment where inflation was low but expected to rise. 

This meant the firm’s management of both the nominal and inflation-linked instruments in the Pensioenfonds ING portfolio would be critical in protecting pensions over the long term, it said.

Back in August, the ING Pension Fund said that, as part of a strategy shift, it would increase its inflation cover to 25% from 8.5% of real liabilities over the next four years, and expand its matching portfolio allocation to 75% from 70%, at the expense of investments in its return portfolio.