WANTAGE, England -- The Metal Box Pension Scheme has rejiggered its asset allocation to boost its exposure to U.S. stocks.
As part of the process, the approximately $2.2 billion pension plan for Carnaud Metalbox Group U.K., a subsidiary of Crown Cork & Seal Co. Inc., Philadelphia, has dumped the CAPS Median index as its benchmark, and broken away from the practice of hiring balanced money managers. Instead, the pension fund adopted a customized benchmark and hired four separate global stock managers to invest in U.S. stocks.
The pension fund's asset allocation is 50% stocks, 42% bonds and 8% real estate, the result of an asset-liability study conducted in the fourth quarter of 1999. Of the fund's stock exposure, 55% is allocated to British stocks, and 45% to global equities, said James Harrington, director of corporate finance at Crown Cork, who is a trustee of the Metal Box plan and a member of its investment committee. The fund anticipates the global managers will allocate about half their investments to U.S. stocks, approximating the U.S. weighting in the Morgan Stanley Capital International World index.
As of Dec. 31, the CAPS Median, popular with British pension funds, had only an 11% weighting to U.S. stocks, but 56% to European equities. It also has a 15% allocation to Japanese equities, 13% allocation to Pacific non-Japanese stocks, and 5% allocation to emerging markets.
"If you had an investor emulating the CAPS median you would be significantly underweighted to the U.S.," Mr. Harrington noted.
The new asset allocation should help the overfunded plan boost returns and reduce risk at the same time, Mr. Harrington said.
Two of the pension fund's four new managers -- Capital Guardian Trust Co., Los Angeles, and Putnam Investments Inc., Boston -- are core managers. It also hired Brandes Investment Partners LP, San Diego, as a global value stock manager and Sit Investment Associates Inc., Minneapolis, as a global growth stock manager.
The pension fund's existing balanced managers -- Gartmore Investment Management PLC, Fleming Asset Management Ltd. and Mercury Asset Management -- will continue to manage European stocks, as well as bonds.
The pension fund also is searching for a global custodian and hopes to hire one shortly.
The fund plans to review its bond portfolio in the second half of the year and will consider adding global high-yield bond managers, Mr. Harrington said.
London-based Mercury Asset Management, the pension fund's existing real estate manager, will continue to manage that asset class.
Watson Wyatt Worldwide assisted.
