Gail Moss finds out what Spain’s biggest corporate pension scheme has been doing to reduce risk in its investment portfolio

Case Study: Pensions Caixa 30


Pensions Caixa 30, the employees’ pension fund of the CaixaBank banking group, is Spain’s biggest corporate pension scheme, with €5.8bn of assets under management. It also has nearly 50,000 members and beneficiaries, with sizeable additions in recent years, as CaixaBank has acquired several other banks. 

At its annual asset allocation review in late 2015, the fund’s trustee board adjusted its strategic asset allocation for 2016, with the aim of reducing the overall level of risk in the portfolio.

The main changes were to reduce equity exposure from 34% to 30% and reinforce the tail-risk strategies using put options, to avoid the volatility and risk of extreme events. In addition, the fixed-income allocation was increased from 48% to 50%, with diversification within the asset class also increased, to protect against continued low returns. 

“We reinforced the role of credit assets by splitting the asset class from the broad market indexes,” says Jordi Jofra, chair, Pensions Caixa 30. “Now we have specific target allocations and benchmarks for sovereign and for credit assets in euro, non-euro and emerging markets.” 

The allocation to alternatives was also increased from 18% to 20%, increasing the percentages in private equity and real assets.

Diversification is also the watchword for the geographical spread of the portfolio. The new mandate for 2016 includes new asset classes such as US treasuries, non-euro credit, emerging markets credit, frontier markets equity, and alternative credit strategies (loans).

“Clearly, the trend in our asset allocation is to increase overseas assets but also to work hard on our currency-hedging strategy,” says Jofra. “This strategy has increased the hedging ratio from 40% to 50%, and we have also included some currency options strategy. We will continue to reduce exposure to soft currencies, following two years of appreciation in the US dollar, pound sterling and Japanese yen.”

The shift towards fixed income appears to have paid off already; for the current year to 31 July, the main driver of returns has been fixed income, with a 4.2% return (the return for 2015 as a whole from fixed income was 3.1%). All fixed-income assets are enjoying positive returns, with emerging markets sovereign debt the best performer. Over the same period, alternatives made a 2.8% return, with commodities and real estate the top performers. And equity assets are also maintaining a positive return, in spite of the negative performance of European equities.

Meanwhile, over the next 12 months, Pensions Caixa 30 expects to keep on working at diversifying within equities, fixed income and alternatives, focusing especially on the underlying portfolio construction. 

“We also have information on the risk factors’ contribution to the total pension fund risk, and we expect to include limits definitions for the different risk factors,” says Jofra. “Under our new governance committee set up in 2016, we also plan to review our beliefs and objectives in order to match our short-term asset allocation with the beliefs and objectives which govern our strategic long-term view.”

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