Pensioenfonds IBM increased its inflation hedge from 75% to 100% last year, according to its annual report for 2021. At the end of the year, a third of the €5.3bn fund’s assets were invested in inflation-linked bonds.
This percentage has since risen further because of strong returns on the asset class which helped propel IBM’s funding ratio to 150.4% by the end of May.
Pensioenfonds IBM has been gradually reducing its investment risk since 2018 in order to protect its strong funding position and accounting for its ageing population. Last year, it finalised this process by increasing its interest rate hedge to 60% in addition to completely hedging inflation risk.
The pension scheme also sold its investments in emerging market debt and its stakes in a Goldman Sachs Asset Management multi-asset bond fund as well as a risk-parity absolute return fund to reduce risk and complexity in the portfolio.
The pension fund also tightened its sustainable investment policy in 2021. The scheme, which has stopped investing in equities for its defined benefit arrangement, has formulated a ‘first target’ to reduce the carbon emissions of its investments in companies by 30% in 2025.
The fund also appointed a second manager for its corporate bond portfolio.
“This reflects our ambition to account for climate risk and our wish to include financials in our bond portfolio again,” the fund said in its annual report.
The steps are part of the fund’s goal to have a carbon-neutral investment portfolio by 2050.
As part of the effort to get there, Pensioenfonds IBM has also joined several climate initiatives including the Net Zero Asset Owners Alliance and Climate Action 100+.
Besides, it wants to “actively contribute to the financing of sustainability” by investing in bonds issued by supranational institutions such as the European Investment Bank, and by lending money to Dutch housing corporations.
Finally, the scheme also plans to start investing in green bonds.
“We are currently looking at a mandate,” said the fund’s director Wouter Van Eechoud. “There are several ways to implement this: via a new manager or by asking one of our current managers to include a certain percentage of green bonds in their portfolio,” he added.