NETHERLANDS - The €2.2bn pension fund of Dutch industrial conglomerate Stork has awarded Acadian Asset Management UK a mandate to run a €120m global ‘low volatility' strategy.
The London-based subsidiary of the US firm has been selected by the pension scheme to deliver equity-like returns with significantly less risk than capitalisation-weighted indices.
"This type of strategy brings about an expected significant risk reduction within our pension plan, without compromising on returns, to the benefit of our cover ratio," said Alfred Slager, chief investment officer at the Stork scheme.
"Acadian has broad experience with the implementation of managed volatility on a global basis, and we are pleased to have them execute this strategy on our behalf," he added.
The new mandate comes after many actively managed mandates have delivered disappointing results over the long term.
"The low volatility mandate focuses on low but stable returns and, over a period of three to five years, we expect to generate similar returns as market index funds," Slager explained.
"Moreover, we expect these investments to be less volatile in decreasing markets," he added.
According to the CIO, the new mandate assists the scheme in linking its investments to its liabilities.
To further enhance the matching of liabilities, the pension fund has increased its fixed income allocation to 35%. Slager said the increase came largely at the expense of Stork's equity portfolio, which was reduced to 35%.
The balance of the pension fund's investment portfolio comprises 12% high-yield bonds, 15% real estate and 3% alternatives.
Acadian Asset Management said it had noticed increasing interest from institutional investors in managed volatility portfolios, adding that it now has more than $1bn (€751m) of assets in this category.
The firm also noted that the rising emphasis on liability-driven investing (LDI) in the pension sector was likely to further boost interest in the managed volatility strategies.
The cover ratio of the Stork scheme has risen to 101% at the end of 2009 - seven percentage points ahead of its recovery plan - after it had dropped to 90% during the previous year.
However, its required cover ratio is 105% and its mandatory financial buffers equate to a funding ratio of 120%.