Too many cooks don’t always spoil the broth
Judge’s comment: “In terms of investment strategy, portfolio construction and SRI integration and with a good track record, this scheme is the market leader in Spain”
Established in 2000, Pensions Caixa 30 is the employees’ pension scheme of Caixabank (La Caixa). The €5.8bn defined benefit and defined contribution fund remains Spain’s largest corporate pension scheme in terms of assets under management, while its membership totals some 38,404 active participants, with 7,882 pensioners and beneficiaries. Pensions Caixa 30 differentiates itself from other Spanish funds by its level of investment sophistication and its focus on the highest level of diversification across asset classes using a multi-management approach, with socially-responsible investment factors always taken into account.
There are three main pillars that govern Pensions Caixa 30. First is adequacy, to ensure it offers the best possible pension to members based on their needs and the scheme’s own governance model. Pensions Caixa 30’s investment process and methodology involve around 60 different managers in conjunction with specific risk controls such as a tail-risk hedging strategy to protect against downside equity risk. The current asset mix comprises 48% fixed income, 34% equities and 18% alternatives. The small defined benefit arrangement accounts for 28% of the total portfolio. Insured by an inflation-linked insurance contract, this is now closed and covers retirees who were formerly members of the scheme, as well as some remaining active and deferred ‘legacy’ members. With a flexible investment policy, the DC arrangement is now the scheme’s main concern and makes up the remaining 72% of the portfolio.
The second pillar concerns sustainability. This is its ability to maintain a high level of performance on a continual basis. In both the long and short-term, Pensions Caixa 30’s results catapult it into the top quartile of both Spanish and European corporate DC pensions. The level of diversification the scheme has achieved, the sophisticated nature of investments, the commitment to socially-responsible investing and the multi-manager strategy all contribute to Pensions Caixa 30’s success. In addition, without any impact on performance or the ability to offer the same level of pension accrual, the scheme has absorbed a high number of new members in recent years as a result of the merger of several internal pension schemes of banks that La Caixa has acquired.
The third pillar refers to integrity. Pensions Caixa runs an active engagement policy and is a signatory of the UN-backed Principles for Responsible Investment. The fund’s corporate governance policy makes full use of all available management tools, which ensures it can efficiently set itself realistic and sustainable goals. A recent development involves Pensions Caixa 30 negotiating a new set of variable fees based on the alpha it achieves versus its benchmark and to cover the recent addition of absolute return strategies to its investments and hence its fees framework.
Although not defined as one its main pillars, risk mitigation is a central theme of the scheme’s operations. This is not just about asset management and investment risk and but also, and just as significantly, the risks implied by the various drawdown methods that the scheme offers its members. These include full or partial drawdown of assets either as lump sums or income to be paid at regular intervals for life or a set period. Members may increase, decrease or link their pensions payments to inflation, or choose to buy an annuity at a later point in time. A member may choose a combination of any of these possibilities. Overall, this poses a risk as well as potential benefit to Pension Caixa 30’s long-term investment policy and success.
Pensions Caixa 30
Founded in 2000
Hybrid corporate pension fund
- active: 38,404
- retirees: 7,882
Market value: €5.8bn
Performance as a percentage:
- one year: 9.13
- three years: 9.76
- five years: 7.27
- ten years: 4.57
- Three overarching principles covering adequacy, sustainability and integrity
- Continually ranked in top quartile of Spanish and European DC schemes
- New fee structure to streamline costs and integrate absolute return strategies
- Gas Natural Fenosa
- Geroa Pentsioak EPSV
- Plan de Pensiones de Promoción Conjunta de DuPont
- Vidacaixa, SA de Seguros y Reaseguros
- David Cienfuegos
- Alvaro Molina
- Manuel Peraita
- Ignasi Puigdollers
- Diego Valero