The Brussels based a BFr125bn (e3.1bn)pension fund of Belgian telecommunications group Belgacom has selected Barclays Global Investors (BGI) to run an e1bn passive currency hedge mandate.
The mandate applies to Belgacom’s entire non-euro currency exposure – a sizeable BFr50bn in assets - and follows a decision to consolidate its strategies with a single manager.
Philip Neyt, managing director of the Belgacom fund, explains the rationale behind the selection: “ We have a large exposure of around 40% (BFr50bn) of the portfolio in ex-euro securities because we benchmark against the MSCI World index and also the European government bond index, which means we have significant exposure to Europe ex-euro – the largest holding being in sterling.”
“ Because this exposure is so large we hedge it back into euros and have decided to do this on a passive basis - meaning that we try to replicate a euro exposure.“ We don’t have any view on currencies nor take any active positions. It is a zero sum game.”
From a longlist of six - shortened to two, Neyt says BGI won through for its passive style.“ Most of the managers we talked to operated active currency hedge approaches.
“ There was very little to choose between the final two managers and it was a very competitive tender, but we chose BGI because of their passive experience and because they were quite proactive in taking over all the exposures from the existing managers and rolling them forward.”
Prior to the decision each of Belgacom’s fund managers – a roster which includes Goldman Sachs, State Street, Puttnam and BGI - had carried out its own hedging on the fund’s behalf. “ This was not very efficient,”says Neyt.