Asset pooling has been around longer than pan-European pension plans themselves, with some companies, such as Unilever, now pooling on a global basis, mainly for the DB segments of their funds.
"We think that increasingly, companies will start to pool pension assets, but we will not see a new pan-European pension fund design for a while," says Frans van der Horst, (pictured right)managing director, Aegon Global Pensions. "Many companies now have in-house teams running the investments of their pension schemes across Europe. Pooling their assets means they can use a single team for asset management. This improves internal efficiencies, besides risk control and governance."
He adds: "Often, schemes sponsored by the same employer but in different countries will buy into different investment vehicles and will not achieve the same returns. Pooling the assets helps optimise returns across the board."
Six out of the 25 pension providers covered by the Mercer survey claim to offer pan-European pension products.
Aegon Global Pensions is now set to enter this new market, launching a range of multi-manager funds, starting with four equity funds and four bond funds. The platform will be based in the Netherlands, using funds for the joint account of the participants (FGRs), the Dutch fund structure that enables fiscally transparent pooling.
"As well as the Netherlands, we also looked at Ireland and Luxembourg," says Van der Horst. "The differences between the three countries were relatively small, but we chose the Netherlands as FGRs have some special features that the others lack. For example, FGRs can be easily converted from being opaque to being tax transparent. In addition, they allow for security lending at a participant level rather than at a pool level."
Van der Horst says the new product fulfils a growing need. "Companies wishing to do their own pooling between the largest pension funds in their stable can really only do it if the total size is €2bn or more," he says. "A lot of smaller companies are therefore looking for a multi-employer scheme. Ours has a low threshold for individual companies, from below €10m of pooled assets - this allows smaller companies with international operations to add additional schemes and build up their pooled assets in stages."
This low threshold is possible as the funds are pooled with existing pools already managed by Aegon. Within the Aegon scheme, pension fund clients will be able to use any combination of the eight vehicles, in any proportion, to fit in with their overall asset allocation.
According to Van der Horst, the funds will embrace a wide geographical spread of assets, but will still be suitable as an off-the-peg product for investors throughout Europe. "Home bias is no longer an issue for many continental countries, although it is still important for the UK," he says. "For the UK, we have developed a special solution with our local partners."
The company hopes to launch the funds by the end of this year.
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