AUSTRIA- The two billion-euro multi-employer Vereinigte Pensionskassen AG, VPK, and the 1.2 billion-euro banking and insurance sector pension fund BVP-Pensionskassen AG have merged.

The funds had raised the idea of merging in a joint press release earlier in the year. They said that due to “historical changes” in the banking sector - and the similarities between the two funds - a merger would “make sense”.

The 3.2 billion-euro merged scheme, renamed VBV-Pensionskasse AG, becomes the biggest player in the Austrian market with 120,000 active and retired members.

“The decision for the merger comes has an enormous meaning in view of the awaited international opening up in 2005 in the field of old-age provision,” BVP stated, referring to the European pensions directive.

For the time being the two funds will keep their investment strategies more or less separated but things may change, a spokesman for the BVP said, adding that the two funds would ‘grow together’ through their synergies.

The BVP’s asset allocation comprises: equities about 26%, bonds 48%, inflation–linked bonds 4.19%, convertible bonds 2.48%, cash 7.2%, hedge funds 4.66%, real estate 1.29%, emerging-market bonds, about two percent, US high yield bonds 2.46% and commodities 1.29%.

The VPK currently has about 30% invested in equities, two per cent of which consists of hedge funds, 69.7% in bonds and 1.6% in real estate.

The VPK and BVP jointly created in 2002 VBV Mitarbeitervorsorgekasse AG, which has currently 70 million euros in contributions and a market share of about 35%.

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