NETHERLANDS – The €13.8bn pension fund for the Dutch printing industry (PGB) has transferred the management of its €4bn government bonds portfolio from BlackRock to its own provider Timeos Pensions Services.
Since 2011, PGB has used government bonds – currently 32% of its assets – to hedge the interest risk on its liabilities, as part of its matching portfolio.
Rob Heerkens, the board member in charge of investment at PGB, said: “As we are now purely invested in liquid and creditworthy bonds of euro-zone countries with at least an AA rating, such as Germany, the Netherlands, Finland and Austria, management is less complicated and easier to carry out in-house.
“After the transfer of our government bonds, the entire management of the matching portfolio will be under one roof.”
Heerkens said Timeos would stick with the “semi-passive” management of “selective bond purchases” matching the pension fund’s liabilities, a strategy introduced by BlackRock.
Timeos already manages the remaining part of PGB’s matching portfolio, which consists of an 18% allocation to euro-zone credit with a duration of no more than 10 years, and interest swaps with a gross exposure of €3.8bn.
Daan Heijting, Timeos’s new director, said PGB’s decision to bring government bonds inhouse would serve as a boost for his Balance Management department.
“Now we can act more quickly, better match investments and liabilities and cut costs for PGB,” he said.
Heerkens said external managers would continue to run PGB’s return portfolio, as Timeos would be unable to acquire the necessary expertise cost-efficiently.
During the second quarter, PGB saw its assets shrink by €500m, while its coverage dropped from 103.5% to 98.7%.
But Ruud Degenhardt, PGB’s chairman, pointed out that the coverage had been based on the three-month average of the forward curve.
“If the interest rates stay at the current level, the funding will rise to 102.5%,” he said.