The $50.4 billion (€32 billion) pension of aerospace and defense giant Boeing is in the midst of heavily shifting its asset allocation towards alternatives and away from equities.
“It’s all part of an effort which started in earnest more than year ago to more closely match the behaviours of the assets to the long term nature of the liabilities,” a Boeing spokesman said. “We’re establishing quite a bit of stability.”
We’re establishing quite a bit of stability.
In line with a plan introduced in late 2006, Boeing has increased its private equity target to 6 percent from 4 percent; its hedge fund target to 6 percent from 3 percent; and its real estate and real assets including timber and energy to 10 percent from 4 percent, according to its annual report. Global strategies, which it defines as seeking inefficiencies in asset classes and markets using long-short positions in securities and derivatives, remains unchanged with a 5 percent target.
The move to better correlate growth of assets to increasing liabilities involves reducing the pension’s exposure to equities to 14 percent from 24 percent.
“Just look at what the stock market has done in the past few years. That introduces volatility into the pension’s returns,” the spokesman said.
Last year, the pension invested 4 percent of its assets in private equity, 4 percent in real assets, 3 percent in hedge funds and 5 percent in global strategies.
There is no specific timeline for Boeing’s pension to hit its alternatives-heavy target allocations.
“It’s an ongoing process that will take a few years,” the spokesman said.
He declined neither to name the pension’s private equity advisors nor to specify the types of funds in which it looks to invest, though Boeing has since 1992 been making commitments to funds across investment strategies, sectors and geographies. Fund managers with whom it has invested include The Carlyle Group, HarbourVest Partners, Forstmann Little, Index Ventures, Evercore Partners and Warburg Pincus, according to sister data service Private Equity Connect.
The Boeing pension investment’s are overseen by chief investment officer Mark Schmid, who before joining Boeing in 2003 managed assets for DaimlerChrysler.