Within multinational companies, local subsidiaries can reduce costs and gain efficiencies by using the global buying power of the total organisation. Local pension plans can take advantage of this leverage when investing their assets. In an ideal situation, local pension plans could invest their assets together in a single (multi country) asset pool to make the most of the global company’s buying power and achieve economies of scale.

For asset pools to be successful, local trustees and company representatives must be certain that plan governance will not be compromised and entry into such an investment would make the local plan better off, either in direct savings or soft benefits, or both. 

Cross-border pooling is feasible. Detailed analysis, in conjunction with a consortium of advisers, highlighted the requirements for successful implementation. During 2005, a few multinationals launched asset pooling vehicles.

While successful, legal, tax, regulatory and operational issues involved with cross border asset pooling should not be underestimated and can create costly barriers to implementation. Multinationals should first assess their own global investment arrangements (asset sizes, asset type, existing vehicle types and existing costs) before embarking on a path towards asset pooling. In many circumstances, preferred provider relationships may be more suitable alternatives to pooling.

To implement an asset pooling vehicle requires senior management support and a corporate culture that allows sharing of knowledge between countries and an ability to successfully gain buy-in from local pension plans.

Our white paper provides background to multinationals considering multi-country asset pooling by reviewing in overview:

• the advantages and disadvantages of pooling;
  
  
• operational, legal, tax and governance issues; and
  
  
• potential costs and benefits.

You can also learn more from our PDF of frequently asked questions.

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