Pension funds raise their stake in commodities
Billions of dollars are expected - Reuters
6/28/2006

Billions of dollars are expected to pour into commodities this year as pension funds build up their exposure to an asset class increasingly considered an essential part of an investment portfolio. The year began with a wave of cash flowing across commodity markets as long-only investment funds, led by pensions, revised investment portfolios to take advantage of a persistent bullish trend. Commodities have the added advantage of sheltering investment from declines in more traditional asset classes, such as equities, which tend to move in the opposite direction. Following are details of pension funds around the world known to have allocated some of their portfolio to commodities or to be considering such a move. EUROPE SWITZERLAND -- The European Organization for Nuclear Research, which employs 2,700 people in Geneva, said in March its pension fund had 4.1 billion Swiss francs ($3.30 billion) in assets, of which just under 5 percent was allocated to commodities. IRELAND --The National Pensions Reserve Fund (NPRF) which aims to supplement Ireland's public pension system and had 15.3 billion euros ($19.24 billion) in assets at the end of last year, said in February it was making a two percent allocation to commodities, including a quarter in forestry. NETHERLANDS * --The Dutch Rail Pension Fund is aiming to invest 1 percent of its assets -- around 13 billion euros -- in commodities in 2006. Over the longer term the fund's goal is to have up to 5 percent of its assets allocated to commodities. The Stichting Spoorwegpensioenfonds is one of the Netherland's biggest pension funds. The fund declined to say whether the money had already been invested or still has to be invested. --Pension giant ABP, the fund for Dutch public employees and the world's second-largest fund, had assets under management of 190.7 billion euros at end-2005. It has some four percent of its portfolio in commodities, which returned 23.2 percent in 2005, versus 18.8 percent in 2004. --PGGMM, which manages pensions for health and social workers, had 71.5 billion euros of assets under management in 2005. It initially allocated four percent of its portfolio and raised that to five percent in 2005, which returned 26.9 percent for the full year. UK -- J Sainsbury , Britains' number three grocer, said in March it will invest a percentage of its pension fund into commodities for the first time in 2006. It will invest 5 percent of a total fund of 3.8 billion pounds ($6.92 billion) into commodities as it seeks greater portfolio diversification. --Bedfordshire County Council, which has assets of 940 million pounds ($1.64 billion) in its pension fund, said in February it was looking at investing 50 million pounds, or about 5.5 percent, of the fund in commodities. --Hermes, the UK's largest private sector fund, which manages BT Group's pension plan, said in January it would invest one billion pounds, or nearly three percent of its assets in commodities. It has some 34 billion pounds of assets under management. --Schroders, one of Britain's oldest independent fund management companies, said in December 2005 it had radically changed the asset allocation of its own pension fund, cutting stocks for alternative holdings. Sixty five percent of its 465 million-pound fund will be held in high-performance sectors such as commodities and private equity. ASIA NEW ZEALAND -- New Zealand Superannuation Fund, set up by the government to partly cover the cost of future pensions, said in October 2005 it had invested 383 million New Zealand dollars ($228.7 million) in commodities, or around five percent, of its NZ $7.6 billion assets under management. AMERICAS CANADA -- Ontario Teachers Pension Plan had 2.1 billion Canadian dollars ($1.87 billion) invested in commodities by the end of 2004 (around 2.3 percent) of its C$90 billion under management), which returned 8.9 percent. It has a passive investment and uses swaps benchmarked to the GSCI. USA * -- America's biggest pension fund CalPERS said in May investment advisors could firm up by August a plan to allocate its first $1 billion in commodities. The $200 billion fund is now invested 60 percent in equities. Fixed income accounts for 26 percent of its portfolio and real estate represents another 8 percent. -- New Mexico State University Foundation is a charitable endowment fund with $97 million under management. It has had $3 million of this in commodities since mid-2005, which is around three percent. It invests passively and benchmarks against several indexes.