German treasurers increase focus on pension asset management

Germany’s association for corporate treasurers has set up a group dedicated to asset management, with a focus in particular on “pension asset management”.

The group is the VDT’s fifth internal subject matter department, and will focus on “the current legal, economic and technical aspects of asset management and, in particular pension asset management within the company from the point of view of corporate treasury”.

Topics covered will include organisation of asset management – in-house versus external fiduciary management, for example – pension finance, and accounting.

The new specialist department is headed by Heinrich Degenhart and Nicolas Vogelpoth, respectively professor of finance at Leuphana University Lüneburg, and head of asset management and quantitative strategy at energy company Uniper.

In a statement, they said: “The volume of liquid investments that need to be actively managed, especially for pension commitments and the associated financial risks, is increasing, which makes asset management increasingly important to corporate treasury.”

In Germany companies can provide workplace pensions in a variety of ways. The most popular route is on-book pensions provision, known as Direktzusage, which stands in contrast to using external vehicles such as Pensionskassen or Pensionsfonds.

According to Mercer, in 2018 the value of the top 30 public German companies’ pension liabilities amounted to €366bn, and pension plan assets were worth €246bn on an IFRS accounting basis.

Michael Sauler, investment expert at Mercer Germany, told IPE the new VDT department reflected the increased attention that companies were paying to pension obligations.

“Looking at the balance sheet, pension obligations have increased over the last couple of years due to declining interest rates,” he said. “As the low interest rate environment is expected to stay for the foreseeable future, managing balance sheet risks is becoming a priority.

“Further, as pension plans are maturing, handling the associated cash flows to pay pensions is an additional challenge corporates want to be prepared for.”