Nestle's first pooled funds, launched in 2001, were European equities, ex-U.K; U.K. equities; U.S. small cap; European small cap; emerging markets equity; and global bonds. In 2002, officials started a hedge fund of funds; earlier this year, Nestle added two more hedge funds of funds.
The goal of pooling, at least in Nestle's case, is to increase returns across all of its plans while gaining synergy on fees, said Mr. Steiner. "We have found that pooling assets is a good way to improve net returns for all of the Nestle plans."
And by streamlining managers across its pension plans, Nestle's plans collectively pay lower investment management fees. Mr. Steiner would not elaborate on the savings.
"We also have better control of the external managers we employ," he said, noting that not all plans in each country have the expertise that Nestle headquarters does.
The corporation has about 200 plans. The biggest plans are in Switzerland, with 6 billion Swiss francs; the United States, with $2.2 billion; the United Kingdom, £1.8 billion; and Germany, €1 billion.
The currency overlay program will use the same external managers as Nestle's Swiss and U.S. plans. Tactical asset allocation exists in the Swiss fund, but is new for the others.
The emerging markets debt fund is new for the Swiss fund, but not for the U.S. plan. The index-linked bond fund exists within the U.K. plan but is limited to U.K. index-linked bonds.
Asset allocation will vary by country. In Switzerland, for example, 5% will be allocated to index-linked bonds, 2% to emerging markets debt and less than 2% to TAA. Mr. Steiner would not disclose the percentage that will be allocated to currency overlay, saying only it will be much higher than the rest. He didn't elaborate further on the other allocations.
Money managers say the idea is gaining momentum.
Ian Baillie, senior vice president and managing director of Northern Trust in Luxembourg, said his firm was part of a consortium formed in 2002 "to identify the most effective regulatory environment and investment vehicle." The consortium — which ended this year and included Goldman Sachs International, London; Mercer Investment Consulting, London; and two multinationals — determined the most effective investment vehicles are the Fonds Commun de Placement in Luxembourg and the Common Contractual Fund in Dublin, both pooled funds. Luxembourg and Dublin were the best regulatory environment.
"No one previously had been able to crack the code," Mr. Baillie said, adding he believes pooling will become a trend among multinationals. Among the benefits, he said: giving all pension funds within a corporation a wider spectrum of asset allocation and improving head-office reporting, corporate governance and tax transparency.
Gavin Nangle, head of business development for State Street International Ireland Ltd., Dublin, agrees that pooling has gained strong attention.
State Street manages U.S. equities for a common contractual fund created by Deutsche Bank, London, for its U.K. pension clients. One of the main benefits is the only tax issue that applies is the pension fund investors' own tax status. This means the CCF has no tax status — or is "tax transparent", which makes pooling attractive, Mr. Nangle said.
