FORUM
The CI Pension Fund Forum
Currency Investor talks to three leading pension fund managers about their day to day currency management activities.
Klaas Reedijk is head of allocation and overlay at APG Asset Management which handles €279 billion (July 2011) of assets. APG is the asset manager for Stichting Pensioenfonds ABP, the pension for the Dutch government and the educational sector. It is one of the world’s largest pension funds with an invested capital of €242 billion (30 June 2011). While APG handles all of ABP’s investment management, it also manages the assets of seven other Dutch pension funds.
Neil Williams is the New Zealand Superannuation Fund’s General Manager, Asset Allocation. The New Zealand Superannuation Fund is designed to partially pre-fund the rising future cost of the VWDWH UHWLUHPHQW EHQHÀW SDLG WR DOO HOLJLEOH 1HZ Zealanders aged 65 or over. The fund size was NZD19 billion (30 June 2011).
Jan Willem van Oostveen, is the investment manager at PFZW. The Dutch healthcare and social worker pension fund PGGM was renamed Pensioenfonds Zorg en Welzijn (PFZW) and remains one of Europe’s largest with €101.9 billion of assets under management.
With respect to your international portfolios, what techniques do you employ (such as risk budgeting) to determine what impact currency exposure is having on returns and how much risk it is adding?
KR: APG Asset Management (APG-AM) is the asset manager for several Dutch pension funds. For each of these clients, a strategic assessment of t’s strategic investment plan, covering a 3-year planning period. On the basis of a MonteCarlo simulation of a vector autoregressive model in which criteria such as median coverage ratio, probability of XQGHUIXQGLQJ H[SHFWHG IXWXUH LQÁDWLRQ indexation and excess return (absolute and liability-relative) are evaluated, the strategic asset mix and hedges are determined. One of these hedges concerns FX exposure, for which regulatory constraints and constraints on liquidity are taken into account in the simulation.
NW: Our benchmark is 100% hedged back to local currency. The decision to have a 100% KHGJH UHÁHFWV WKH WUDGH RII EHWZHHQ WKH risk of the position and the expected return. The impact of the 100% hedge position is captured in the benchmark’s expected
52 Currency Investor | Autumn 2011
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