NETHERLANDS - The €3.6bn Pensioenfonds Horeca & Catering, the industry-wide pension fund for the Dutch catering and hospitality industry, has appointed F&C for interest-rate hedging.
The scheme said it wanted to hedge further the sensitivity of its funding ratio for interest-rate developments and to review its implementation.
The mandate involves a 75% strategic hedge of interest-rate risk through bonds and derivatives, monitoring counterparties and collateral management.
Under the mandate, F&C will manage more than €700m ($962m) in a diversified fixed-income portfolio of long-term, AAA-rated government bonds, issued by financially stable countries in the European Union.
This reflects the fund's desire to invest in government paper issued by countries with high-level solvency, which also qualifies as collateral for its derivatives portfolio.
Ernst Hagen, head of asset management for the pension scheme, said: "This move has supported Horeca to further improve its risk management.
"[It does so] strategically, as the mix of long-term euro government bonds and interest-rate derivatives hedges interest-rate risk in a logical and accountable manner; tactically, as the duration structure more closely matches our liabilities; and operationally, as decision-making remains with Horeca, and collateral is managed on a daily basis.
"F&C has proved to be the perfect partner to help achieve all this."
Ben Kramer, F&C Netherlands executive director, said: "Today more than ever before pension funds' actual interest-rate policies and their impact on funding ratios are at centre stage, and an experienced professional can help funds stay in control.
"We are delighted with the confidence Horeca puts in the expertise of F&C, which has implemented more than €107bn in structured overlay solutions to date."