WILMINGTON, Del. - DuPont has initiated a sweeping program to coordinate its pension fund investment practices worldwide.
As part of the program, DuPont early this year began internally managing the pension assets of its Conoco subsidiary in the United Kingdom. Pension executives also plan to "do something similar" with the pension assets of the DuPont U.K. unit in the near future, according to Jack Stair, senior consultant with DuPont in Wilmington.
The company already manages almost all of its $15 billion in U.S. domestic pension assets internally; its $10 billion savings plan is managed externally.
DuPont has eliminated the five external managers used by the Conoco pension fund; its DuPont U.K. fund has two outside managers, said Mr. Stair. He did not name the managers or cite asset sizes of the U.K. pension funds.
According to Pension Funds and their Advisers, as of July 1994, the pension assets of Conoco (UK) Ltd. totaled 129,672. The pension assets of DuPont (UK) Ltd. were 326,953, as of March 31, 1994, before the purchase of the global nylon business of ICI.
DuPont has $17 billion in defined benefit assets worldwide, and $27 billion in total employee benefit assets.
The new program, under way for about a year, followed an internal study by Mr. Stair that showed wide discrepancies in the company's pension polices and practices. As a result, company officials decided to create global pension coordination from Wilmington in financing methods, funding practices, actuarial practices, investment management policies and accounting practices.
Mr. Stair serves as global coordinator, while a designated DuPont official - usually from the treasury department - in overseas locations carries out the practices and policies.
"The motive was not so much to save money but to establish consistent pension policies and practices so that business results, especially in terms of cost and cash flow, would be comparable," said Mr. Stair.
The first task was to ensure all plans were converted from insurance contracts to trust funds - a practice that had started before central coordination was introduced. "By the first of next year, substantially all of the insurance contracts" will have been converted, Mr. Stair said. The move has produced "substantial cost savings," but he wouldn't specify the amount.
With the change to trust funds, the issue arose of who would manage the trust funds, he said. That led to the assessment that U.K. pension assets could be managed internally by DuPont's pension department in Wilmington. Looking forward, that department will decide whether to continue using external managers for funds in Canada, Belgium, the Netherlands, Switzerland, Australia, New Zealand and Japan. DuPont has funded plans in about a dozen countries. Coordination activities may extend to asset/liability analysis globally and, later, even pooled funds.
"I can see down the road, as European tax barriers begin to fall, clear possibilities for a pan-European pension fund. And even further down the road, global investment strategies, in which asset/liability modeling can be done on a worldwide basis," said Mr. Stair.
Although many multinational companies are centralizing their pension operations to some degree, the DuPont program appears to be among the most advanced.
"I think we're ahead of the pack because we have expertise in internal asset management that we can tap. There are not a lot of companies left in America with internal staffs that are already familiar with the markets," Mr. Stair said.
Among others, Ford Motor Co., Dearborn, Mich., already has begun some pension coordination.
The project is part of the company's broad global reorganization. At a minimum, Ford's pension units around the world are supposed to look to M.E. Maertens, the U.S.-based director-trust investments for coordination and advice, said Treasurer Malcolm Macdonald. The idea is to "make sure we're applying common fiduciary standards, common standards in evaluating managers, things of that nature," he said. (Pensions & Investments, Oct. 2).
He said company executives also are exploring whether a global fund would be possible, whether managers can be shared among funds and whether asset allocation can be made globally.
