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Alternative Market Briefing

Textron pension plan wants to invest in private debt structures (1)

Tuesday, April 22, 2014

amb
Charles Van Vleet
Benedicte Gravrand, Opalesque Geneva:

As a private pension fund CIO at Textron, Charles Van Vleet gives insight into his strategic asset allocation over the next 12 months and his best tactical allocation ideas. He explains why he is increasing his allocation in private debt structure funds, and why corporate plan sponsors often prefer private equity alignment and structures but also want to control extension risk.

Textron’s pension plan is currently 50% invested in public equity, 20% alternatives and the balance in fixed income.

Within the fixed income allocation, "we would be considered very duration-light, LDI -light, we’re not particularly concerned about surplus volatility for Textron…," Mr. Van Vleet says during a recent Opalesque video interview. Furthermore, the corporate plan sponsor is only 18% hedge ratio - probably about half as much as its peer group.

LDI (Liability Driven Investment) is a form of investing in which the main goal is to gain sufficient assets to meet all liabilities, both current and future.

Within alternatives, Textron’s largest allocation is in direct core real estate, 3% in hedge funds and the balance in private equity.

With regards to Textron strategic and tactical allocation over the next year, the objective this year is to increase the direct core r......................

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