Swire Group has just appointed Pareto Partners in London to run a currency overlay mandate for the HK$3.5 billion ($448.77 million) Swire Group Retirement Benefits Scheme, says Paul Moore, company secretary.
The decision was spurred by HSBC Asset Managements decision last year to pull out of tactical asset allocation. While Swires relies on simple global balanced fund mandates for the smaller pension funds within its group (encompassing nearly 60 corporate entities), for the past six or seven years it has followed a specialist strategy for its largest pension fund, the Group Retirement Benefits Scheme, which covers listed entities Swire Pacific and Cathay Pacific Airways (but not the groups third listed company, Hong Kong Aircraft Engineering).
It has separate equities managers for Asian equities (Schroder Investment Management), North American equities (Goldman Sachs Asset Management), European equities (Deutsche Asset Management), Japanese equities (Schroders) and fixed-income (Credit Suisse Asset Management).
Above these managers, the company had relied on HSBC Asset Management for rebalancing and short-term active decisions on asset allocation. But HSBC exited this business last year, and Swires had found its tactical asset allocation strategy had not met expected returns, so the company re-evaluated its investment strategy. Watson Wyatt gave advice.
The first step early this year was to rebalance its equities-to-debt ratio from 80%/20% to 70%/30% in order to reduce some risk and protect an existing surplus in the fund. Pursuant to this, an additional fixed income specialist was appointed last October: Westin Asset Management of Pasadena, California.
Next, earlier this year, Swires appointed State Street Global Advisors to run 15% of the portfolio in an indexed rebalancing structure. This is the first time Swires has taken up passive investment. We wont be able to achieve a return above the benchmark but its easy to manage and offers low-cost management fees, Moore explains. He notes the management fees for the index fund run around 10bp, versus 40-60bp for an active portfolio.
The final step has just taken place with the appointment of Pareto Partners to run the currency overlay strategy. The firm operates out of London and Sydney and has also just opened a Singapore office.