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PGB implements protection strategy for €12bn equity portfolio

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Dutch multi-sector pension fund PGB has appointed BMO Global Asset Management to implement a protection strategy for its €12bn equity portfolio.

In a statement, BMO said the “dynamic” strategy would help protect the €26.5bn fund from major equity market shocks.

“The use of equity protection strategies is high on the agenda for pension funds, driven by increased uncertainty in financial markets,” BMO said.

PGB’s funding ratio fell from 111.5% at the end of September to 107.6% over the course of October and November as global equity markets declined.

Despite this, its policy funding ratio – measured over 12 months – has remained steady at 109.2%. While it is not in danger of having to cut pension payouts, as with some major Dutch schemes, PGB cannot grant any inflation-linked uplifts to its members until it is at least 110% funded.

Harold Clijsen, CIO of PGB Pension Services, cited BMO’s responsible engagement overlay – which PGB has been using since 2017 – as a “positive experience” that had given the pension fund confidence to appoint the asset manager.

PGB appointed BMO to oversee its shareholder voting policy last year to aid engagement with companies in which the pension fund has invested.

Several UK pension funds have also rolled out equity protection programmes in recent months, including the London Borough of Tower Hamlets Pension Fund, the South Yorkshire Pensions Authority and Worcestershire County Council.

PGB won the award for Best Pension Fund in the Netherlands at IPE’s annual awards ceremony in Dublin last week.

Roy Kroon, John Crees

Credit: Patrick Frost

PGB’s Roy Kroon accepts the IPE award from Columbia Threadneedle’s John Crees

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