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Metalektro allocates 10% of assets to high-yield

NETHERLANDS – Pensioenfonds Metalektro, the 12.5 billion-euro pension fund for the Dutch metals industry, has allocated more than 10% of its portfolio to high-yielding fixed income in a bid to improve returns.

It has assigned a total of 1.38 billion euros across six mandates covering the US and emerging markets. The fund said in a statement that the move was “to improve the risk and return characteristics of the fund”.

“In an environment of low nominal interest rates the importance of higher coupons and alpha to total return increases,” the fund, which is known as PME, said.

“PME believes that for the forthcoming years higher yielding markets will deliver a decent return, and on top of that inefficiencies provide opportunities to managers to outperform the benchmark.’

For US high yield, PME appointed GoldenTree Asset Management, ING Ghent and SEIX Investment Advisors to run a total of 775 million dollars, benchmarked against the Merrill Lynch High Yield Master II.

The same sum was allocated to emerging market debt, benchmarked against the J P Morgan EMBI Global Diversified. The three managers appointed were Ashmore Investment Management, Bridgewater Associates and Citigroup Asset Management.

“The combination of managers has been structured in such a way that style biases are mitigated and that in both up and down markets outperformance is expected to be achieved,” PME said.

Roland van den Brink, managing director of investments at PME, said: “Emerging market debt and US high yield are an important diversification for us.”

“Our allocation should help increase overall returns without increasing overall risk. In addition the active management of these assets helps me to achieve my target of earning 40 basis points net of all costs through active management whilst keeping tracking error around two percent.”

PME said it has cut its allocation to European government bonds, private placements and convertibles to finance the move to high yield. The fund evaluated a total of 66 managers for the six briefs, aided by Bastiaan de Kreij of independent consultancy Alpha Advisor.

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