GERMANY - Energie Baden-Württemberg, Germany’s third largest energy firm, has completed a revamp of the way its pension money is invested, switching to a so-called ‘master-fund’ structure for the assets.

In April last year IPE reported EnBW wanted cut the number of investment companies handling a total of €5.3bn in assets from 16 to just four - all of whom would be providers of German master funds.

The €5.3bn figure includes both pension money and reserves used for the dismantling of nuclear reactors as part of Germany’s phase-out of the power source by 2021.

By centralising back-office administration of institutional funds - for example reporting - master funds enable investors to cut costs and boost transparency. They also allow for easier diversification into alternative asset classes, like private equity and commodities.

In June 2005, EnBW hired the investment consulting arm of FondsConsult. This firm was acquired last January by Swiss consultant Complementa.

Ingo Peter Voigt, EnBW’s head of finance and investor relations, has now told today’s Börsen-Zeitung that providers for the four master funds have been hired. They include INKA, part of HSBC Trinkaus & Burkhardt, Allianz Global Investors, Helaba Invest and Metzler Asset Management.

EnBW said Universal Investment, Germany’s biggest provider of master funds, was not picked as “it did not satisfy our precise requirements”.

Voigt told the paper that with Complementa’s help, EnBW had devised a new asset-allocation for the €5.3bn. As a result, the firm invests 62% of the assets in fixed-income, a good deal of which is investment grade government debt.

EnBW also allocates 25% of the assets to equities and another 5% to convertible bonds. Regarding alternatives, the energy firm has 3.2% in commodities and, according to Voigt, is considering an initial investment in private equity.

Private equity could total 3-5%, Voigt said, adding that the share of commodities was set to rise to 5% amid the current boom on those markets. “We are desperately looking for products with which to step our investments in commodities,” he told the newspaper. Investing in currencies as an asset class is another option open to EnBW in the short term, Voigt added.

With its current asset allocation, EnBW aims to achieve an average annual return of 5.5%.

Meanwhile the €1bn German pension fund Pensionskasse für die Deutsche Wirtschaft has also included private equity as a strategic asset class into its portfolio, according to reports.

One percent (€10m) of the fund’s total allocations were invested in a private equity fund of funds, an asset class which is as yet little used by European pension funds.

“Like shares and bonds and unlike hedge funds and commodities private equities is economically linked to our liabilities side and is therefore interesting to us in the long run”, PKDW-Chairman Bernd Walgenbach is quoted
as saying in the dpn newsletter.

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