Mercer has strengthened its position in Germany’s expanding pension buyout market through a strategic partnership with Vedra Pensions, underscoring growing competition among consultancies and asset managers to secure de-risking mandates.
Under the agreement, Mercer will provide advisory services on investments, portfolio construction, trust solutions and outsourced chief investment officer (OCIO) mandates, while Vedra will establish and operate pension corporations (Rentnergesellschaften) – vehicles used in German pension buyout transactions.
“Pension buyout solutions are increasingly in demand in Germany. This partnership represents a milestone. It offers companies outsourcing their [pension] liabilities the opportunity to improve their financial stability,” said Carsten Strube, head of pensions at Mercer Germany.
Mercer said contractual trust agreement (CTA) solutions, such as Mercer Treuhand, will underpin governance frameworks to ensure assets are managed in the interests of beneficiaries and the companies transferring liabilities to external risk carriers.
The consultancy has been developing buyout solutions for clients in recent years, acting as adviser, administrator, trustee and capital investment manager, Strube told IPE. Mercer’s collaboration with Vedra had shown “our skills and strengths complement each other very well”, he added.
The deal highlights intensifying competition in Germany’s fast-developing buyout market.
WTW entered the segment in July with a multi-layered structure comprising a foundation, pension holding company, pension corporation, pension trust, Pensionsfonds and a CTA. It is targeting transfers of pension liabilities from small and medium-sized enterprises in the €50m–€500m range.
Asset managers are also stepping up activity in a market expected to reach €60bn in the coming years.
Schroders is working with pension corporations through OCIO mandates and specific asset class strategies, while BlackRock recently secured an OCIO mandate from Funding Solutions Deutschland for a buyout deal involving automotive supplier Sinterwerke Herne.
Earlier this year, Lampe Asset Management – the institutional arm of Hauck Aufhäuser Lampe bank – formed a strategic partnership with Vedra for managing liquid assets of companies with pension liabilities.
Vedra’s latest expansion with Mercer follows the buyout of pension liabilities from Hypo Real Estate Holding (HRE) this week. Munich-based HRE, owned by the German government and with the Financial Market Stabilisation Fund (FMS) among its shareholders, is transferring its pension obligations to a Vedra-acquired pension corporation.
“The collaboration with Mercer and existing partners supports the further institutionalisation of the pension risk transfer market in Germany,” said Tilo Kraus, managing director at Vedra.
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