GERMANY - Deutsche Bank has created a European cross-border asset-pooling vehicle for its own pension assets, and is now inviting clients to join too.
The German-based banking group has subsidiaries in 73 countries but is currently in the process of transferring its German pension assets to a Luxembourg-based pooling structure, and may then add the assets of its overseas plans.
Assets from the bank's UK plans, as well as those in the Netherlands, Switzerland and Belgium could be next to follow after talks with local trustees as the move "makes sense", according to Nikolaus Schmidt-Narischkin, head of fiduciary management at DB Advisors in Frankfurt.
He admitted that building the structure was "a lot of work" but said he is now convinced it will lead to "more efficient management, unified risk management, allow for more complex investment strategies and the use of economies of scale" within the company's own pension arrangements.
"The pension assets in the various countries are invested quite differently, with some being in mutual funds, others not having an efficient reporting or being very costly," pointed out Schmidt-Narischkin.
The pooling platform, which consists of a fully-staffed Luxembourg SICAV for fixed-interest investments and a Luxembourg FCP (fonds commun de placement) for equities, allows local trustees to either invest within existing virtual pools set up for Deutsche Bank's German assets - so scheme assets are ring-fenced for regulatory purposes but managed collectively to gain economies of scale - or create others alongside.
External managers can be brought into the ring-fenced pool, as can individual asset allocations, and the vehicle will be open to large international DB clients, confirmed Schmidt-Narischkin.
The bank started to move its German pension assets from the former €6bn German special funds in May, forcing the company to review existing investments and processes.
"For example, Luxembourg regulations demand a pre-trading check which so far had not been necessary," noted Schmidt-Narischkin. That said, he argued, the advantages of such a structure justified the workload as they include "massively better reporting and the possibility to have a risk overlay over the whole structure".
Deutsche Bank chose Luxembourg as the domicile for the pooling vehicle as its subsidiary DWS has been operating from this country for several years.
DB Advisors is the institutional investment business of Deutsche Bank's asset management division.
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