Pension funds raise their stake in commodities
Billions of dollars are expected - Reuters
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
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.
-- 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.
--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.
* --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
--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.
-- 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
--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.
-- 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.
-- 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.
* -- 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