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Impact Investing

IPE special report May 2018

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Siemens tracks assets globally

Siemens employs around 450,000 people worldwide and in the US is the biggest foreign employer with some 80,000 employees. The group’s pensions liabilities, including Germany, amount to some €18.5bn.
At the end of September 2002, to coincide with the end of the group’s financial year, the Siemens group treasury department began introducing a new uniform pension asset management reporting system.
The objective of the new system is to enable the firm to look at all its pension arrangements worldwide as one virtual pension plan. With the help of a master record keeper, all of the group’s major pension plans worldwide will be reporting their asset, risk and performance data according to a standardised group-wide platform. The main motivation for setting up the project lay in the lack of comparability among local results as well as a historical dearth of timely and flexible information.
Additionally, this will enable performance and other information to be compared by the group on a consistent basis. The system will bring benefits not just to the different local pension funds, but also to the group as a whole and Siemens see the move as part of the group’s longstanding commitment to employer sponsored schemes.
A group-wide US GAAP accounting structure overarches local accounting, which local operations have to follow, and this now brings a common reporting and accounting structure to the pensions area. Reports will be available with just one day’s delay. This means that the group’s financial director can have a very up-to-date statement of each pension fund’s position and performance down to a stock specific level. The fund believes this would be particularly important should there be another event like 11 September.
The information that comes through the system is designed to be available both at a local and central level.
As a result, the group’s corporate finance department will be able to talk to the local pension fund about its results more quickly and with much better information to hand.
Discussion of the new system was given considerable airing by Siemens’ International Pension Council, which meets regularly every six to nine months and brings together finance, human resources, accounting and tax experts in the group from all over the globe. The council could see the advantages of having complete data available with everyone working to the same set of numbers. The overall aim was to bring every unit worldwide up to the standard of the best.
Parts of the Siemens group already work closely with each other in the area of pensions. Siemens Financial Services (SFS), provides a wide range of financial solutions both for the group and external clients. Much of the pensions strategy implementation is co-ordinated through SFS with the operating units worldwide.
Siemens’ pensions operation also works closely with Pension Advisory, the pensions consultancy business of SFS, who act as global advisers for the group.
Siemens believes their background as an adviser with practical, international corporate experience gives them an edge over competition, arguing that a plan sponsor perspective offers a difference in quality.
The firm also runs its pensions asset liability modeling through Pension Advisory, using expertise derived from its specially developed ALM system. Siemens claims it is the only corporate-owned asset liability modeling system on the market.
The new pension asset management reporting structure will also be extremely valuable when selecting asset managers for the group worldwide. Siemens started co-ordinating these activities on a group-wide basis earlier this year, drawing on the expertise of competence centres within the group.
Pension Advisory (SFS), Innovest, an Austrian manager-of-managers affiliate of SFS and the management staff of Siemens’ US pension fund have developed extensive expertise in this area and today form a resource available to any group pension fund looking to change managers.

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