mast image

Special Report

Impact investing

Sections

KBC eyes bonds, indirect real estate in LDI move

BELGIUM - The €850m KBC Pensioenfonds, the third largest scheme in Belgium, is shifting from direct to indirect real estate and revamping its bond portfolio as part of a liability-driven investing (LDI) strategy, its managing director says.

Edwin Meysmans, who's also vice president of the Belgian Pension Fund Association, said the scheme was in the process of implementing a series of measures following as asset-liability study.

The changes also involve looking at infrastructure and timber. "We're in the course of implementing these measures," Meysmans told the UK & Irish Pension and Investing Summit in Dublin today.

The bond portfolio - previously exclusively government bonds - was being amended to reduce the mismatch between assets and liabilities. It was found that the average defined benefit obligation was 12 years while the bond duration was six years. "We're now bringing the six closer to the 12," Meysmans told delegates.

An issue was timing, he said, adding: "On a strategic level this is what we want to do but corporate bonds are very expensive."

The bond portfolio, currently 36% of total assets, should rise to 40-45% of assets, the ALM study found. "How should we do that - the easy way: sell equities and buy bonds?"  This was very expensive and could lead to higher contributions. Instead an instead an approach dubbed "Booster" is being developed.

"We want to reduce the volatility and the correlation to public equities," Meysmans said.

As for infrastructure, this was "something totally new". "Infrastructure holds the promise that it a bond-type investment but with equity type returns. That is what every pension fund is looking for. Infrastructure provides that. Let's see how that evolves." Timber was also being investigated due to its low volatility and low correlation to public equity.

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-2548

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 300-400m.
    Closing date: 2019-07-30.

  • QN-2549

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 300-700m.
    Closing date: 2019-07-30.

  • QN-2550

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2551

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2552

    Asset class: Fixed Income, High Yield (Active).
    Asset region: High Yield (US).
    Size: CHF 500-600m.
    Closing date: 2019-07-29.

  • QN-2553

    Asset class: Fixed Income, High Yield (Passive or Passive Enhanced).
    Asset region: High Yield (US).
    Size: CHF 500-1'100m.
    Closing date: 2019-07-29.

  • QN-2554

    Asset class: Global Real Estate (Equity, unlisted Funds).
    Asset region: World (ex-Switzerland).
    Size: CHF 200 mn (potential for further growth).
    Closing date: 2019-08-07.

  • QN-2555

    Asset class: Real Estate.
    Asset region: European.
    Size: EUR 50 - 100 million.
    Closing date: 2019-07-22.

  • QN-2556

    Asset class: FX Hedging.
    Asset region: Global.
    Size: Mandate size of CHF 1.5 bn.
    Closing date: 2019-08-09.

  • QN-2557

    Asset class: All/large Cap Equities.
    Asset region: China A-shares.
    Size: Unit linked platform (0m USD in initial investment).
    Closing date: 2019-08-01.

Begin Your Search Here
<