EUROPE – Consumer products group Unilever has set up a pension asset pooling vehicle called Univest which could grow to around €3-5bn in size.
The firm said Univest was expected to reduce risk and enhance net return potential. It would provide a “diversified external manager” facility for Unilever schemes worldwide.
Unilever’s Dutch and UK funds will place more than €1bn each into the new vehicle, which is a Luxembourg-based Fonds Commun de Placement. The FCP will be run by Northern Trust, which will also provide custody and fund administration.
“We expect Univest to generate significant benefit for Unilever and its pension funds,” said Philip Lambert, head of Unilever Corporate Pensions and chairman of the investment committee in a statement. He was not available for direct comment.
“We also expect Univest to improve the consistency in quality of asset management, lower overall risk and allow us to better leverage our economies of scale."
Univest has appointed 14 managers who will run 22 mandates in six separate sub-funds, although Unilever declined to disclose further details. So far only equities will go into the vehicle but bonds, hedge funds and other assets could be added later.
Initially, Univest will offer global equities split into six sub-funds (UK, Europe, US, Japan, Pacific and emerging markets),” said spokesman Trevor Gorin.
“We anticipate offering a global equity share class in early 2006 and might then look at bonds and hedge funds. This would require the setting up a second FCP which would be a non-UCITS vehicle, with the main FCP having a UCITS passport.”
Unilever has 98 separate schemes with a total of about €16bn in assets. The firm’s local pension funds retain full ownership of their assets invested in Univest, through being unit holders in a series of multi-manager regional equity sub-funds with best-in-class managers.
All the sub-funds are ring-fenced from one another and enable each individual Unilever pension fund to continue to define its own geographical investment strategy.
Northern Trust will manage the vehicle with “critical input” from the 11-member Univest Investment Committee.
Northern said Univest was the “first fully tax-transparent, cross border pension pooling vehicle launched for a multinational” – although Unilever Gorin said it does not yet have US tax recognition.
Mercer will provide manager research, monitoring and fund structure services for the new vehicle. It would also help to develop governance procedures and policies.
“We are delighted to have been appointed to provide advice to Unilever's pooling vehicle,” said Mercer principal Mark Walker. “We have worked with Unilever over a number of years to help bring this leading edge product to fruition.”
The FCP structure was chosen over Ireland’s Commun Contractual Fund because it was familiar to the tax authorities,” Gorin explained.
“The one drawback was the one basis point tax d'abonnement, but after Northern Trust had discussions with the Finance Ministry in Luxembourg, they agreed to create a new class of investors called 'muiltinationals' and we are exempt from the tax – as long as only Unilever pension funds invest in the vehicle.”
“It’s good for the industry, that they’ve gone public,” said Bernard Hanratty, director of securities and fund services at Citigroup. He suggested that some of the providers would have seen the project as investment and would have kept their fees “to the minimum”. Unilever said its financial relationship with Northern Trust and Mercer was confidential.
Hanratty said the move was an important first step towards the objective of truly pan-European pension funds.