Nestle USA, Glendale, Calif., plans to hire about three fixed-income managers to leverage its $2.3 billion pension fund's $580 million bond portfolio, said Manfred Lehmann, vice president and treasurer.
Fund officials, who want to enhance returns while providing greater diversification within the total portfolio, might extend the duration to 10 years from five, Mr. Lehmann said. Extending the duration also would bring plan assets more in line with plan liabilities, thus dampening volatility of the funding level, he said.
Mr. Lehmann has sought advice from PIMCO, BlackRock, Western Asset Management, Bridgewater Associates and NISA Investment Advisors on how to achieve 80% leverage of the bond portfolio but still maximize returns.
The Nestle pension committee will consider proposals at its October meeting.
Mr. Lehmann said he is also working with Bridgewater officials on ways to further shrink or keep constant equity's effect on the fund's risk budget. "I don't clearly see how I will do that," he said.
Nestle also invested $20 million in Bridgewater's All Weather strategy and $10 million in the PIMCO All Asset Fund, he said. Along with a $20 million allocation to Grantham, Mayo, van Otterloo's global allocation absolute return strategy about 18 months ago, the three managers provide a "stable anchor" for the portfolio, he said.