Volkswagen Pension Trust, the pension fund for the German car giant, has completed a sweeping revamp of the way its e1.5bn in pension assets are invested.
Last year, VPT decided on the revamp after being dissatisfied with the asset allocation for the e1.5bn in assets. “Because we have always taken a conservative approach to investing, certain asset classes that are standard for investors like us were missing in our portfolio,” says Albrecht Möhle, board executive at VPT.
Möhle says that another problem was that VPT was too heavily invested in balanced funds instead of pure equity or bond funds.
To assist in the revamp, VPT hired German investment consultant Alpha Portfolio Advisors. Alpha completed an asset-liability study, helped to identify the missing asset classes in VPT’s portfolio and led the asset manager search.
As part of the revamp, VPT also switched to a master fund provided by Helaba Invest. Depotbank services, among them clearing and settlement, are handled by State Street. VPT has not retained Alpha for monitoring asset managers – it will do it itself on the basis of data supplied by State Street and Helaba.
As a result of the revamp, VPT is invested in the following asset classes: European value and small cap stocks, US value stocks, Japanese stocks, European government and corporate bonds and US aggregate bonds. VPT is also using an overlay manager.
“With this mix, we believe that we have achieved a high degree of diversification,” says Möhle. “Of course, we know that there are other interesting asset classes out there, including hedge funds and real estate. We will be taking a look at these in the future.”
Launched in 2001, VPT is a German Pensionsfonds, meaning that unlike other pension vehicles, it does not face investment restrictions about equities or alternative investments like hedge funds. The fund serves 168,000 employees at the Volkswagen car group.
VPT’s pension assets include not only those from corporate pension plans but also from Volkwagen’s so-called ‘time-value fund’. The fund is also known in the industry as an ‘overtime account’.
Pioneered by Volkswagen in 1998, the accounts enable employees to save the monetary equivalent of overtime hours, unused holiday, cash bonuses or a portion of salary to help finance retirement or any time off from work.
VPT says it has taken in e575m in assets from its time-value fund.