Metalekro, the E14bn pension fund for the Dutch metals industry, is to allocate E700m, equal to 5% of assets to commodities.
The Schipol-based fund, known as PME, says “the risk return profile of the fund will improve due to the diversification benefits of commodities and the extra return benefits of backwardation”.
Backwardation is the theory that futures prices will tend to rise over the life of a contract. The allocation will be benchmarked against the GSCI index. PME is looking to invest a minimum of 50% passively and a maximum of 50% actively.
For the active implementation managers will be considered with an active strategy relating to the trading of commodities, a transparent investment process, a minimum track record of three years and minimum assets under management of E250m.
For the passive implementation overlay strategies utilising futures or swaps that track the GSCI with a low tracking error will be considered.
PME added that it intends to select a cash manager to manage the cash backing the commodities allocation. PME will consider both passive and active management up to a yearly tracking error of 0.50% benchmarked against three month Euribor.
“The allocation will be implemented in 2004 dependent on the market environment.”

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