back to article IBM's pension fund sells most of its IBM shares

IBM's pension fund has sold most of its shares in IBM. The fund's February 2017 SEC filing records it as holding 82,802 shares. But the May 2017 filing records a reduced holding of 12,451 shares. Selling shares isn't unusual for a pension fund as dividends alone can't always provide such entities with the cash they need to …

  1. Anonymous Coward
    Anonymous Coward

    IBM

    Just keep firing the workforce to maximise profits.

    Cheap useless outsourced labour can be used if anyone is stupid enough to ask you to do some work.

    1. The Man Who Fell To Earth Silver badge
      Boffin

      Re: IBM

      The folks managing the pension fund have a legal fiduciary responsibility to those vesting in the pension fund, not showing loyalty to the company.

      Their best bet is to follow Warren Buffetts advice, which is to simply invest in an S&P 500 index fund like Vanguard's. That is what Buffett specified in his will to be done with that portion of his wealth that is to provide for his wife.

    2. ps2os2

      Re: IBM

      We bought a CPU from one of these outsourcers. Support was zippo if there was a question you wanted to ask it was an automatic $1000 extra billing and some VP had to sign a contract to authorize it. We weren't even allowed to talk to the salesman. It was the first time we ever ran into this. Needless to say, after that we went with IBM, even though it cost more. Now it sounds like all of IBM is going that way. Needless to say, now everybody is looking to convert off the mainframe, way to go IBM, you bit the hands that feed you.

  2. Korev Silver badge

    "Just keep firing the workforce to maximise profits in the short term"

    FTFY

  3. John Miles 1

    Possibly good strategy

    I'm surprised the pension fund holds any shares in the sponsoring company. The whole idea is to reduce risk by making the fund independent of the company. If the employer were to perform badly or go bankrupt you would not want the investments that support the employee's pension to be wiped out as well.

    There is also a surprising incentive for pension funds to move out of shares. Whilst shares historically perform better than bonds and gilts it's the latter that are used to value future pension liabilities. If a fund holds most of its assets in gilts and bonds then the value of its assets will match its liabilities quite closely. It stops the deficit varying unpredictably but is ultimately more expensive for the sponsor ( i.e. employer).

    1. Mark 110

      Re: Possibly good strategy

      It sounds like someone is betting on the share market being near its peak. Might be a good bet - we are probably due another crash in the next 2/3 years.

      1. Grunt #1

        Re: Possibly good strategy

        Remember it's those who are paid the most who get to gain the most from the pension fund.

        If I were running IBM I would protect my pension.

        1. quxinot
          Joke

          Re: Possibly good strategy

          Surprised they aren't shorting the stock. Easy moneymaker.

          1. Grunt #1

            Re: Possibly good strategy

            I guess allowing more shares onto the market allows IBM to buyback more shares while the price is suppressed.

        2. Doctor Syntax Silver badge

          Re: Possibly good strategy

          "Remember it's those who are paid the most who get to gain the most from the pension fund."

          The staff, especially those at a senior level, should be isolated from those making the investment decisions if only to avoid charges of insider trading.

          1. Anonymous Coward
            Anonymous Coward

            I completely agree

            Companies should never hold shares in themselves in a pension fund, that's a double whammy on employees if things take a major turn for the worse!

            Particularly if IBM has a stock purchase plan for employees (anyone know?) since those interested in owning IBM stock will already have it, and don't need more shares through their pension.

      2. N13L5

        Re: we are probably due another crash in the next 2/3 years

        I don't think we have that long.

        But I'll be pleased if you're right and I'm wrong :)

  4. Frank N. Stein

    "Firstly, IBM's pension fund deciding that holding IBM stock isn't the best way to meet its obligations is hardly a vote of confidence in the company's future. Or a vote of confidence in the tech sector in general.

    Second, the pension fund is not the only company worried about Big Blue's prospects. Also in Q1, widely-admired investor Warren Buffet recently shed most of his IBM stock after reportedly souring on Big Blue's prospects. Buffet is thought to worry that for all of IBM's impressive dividend-paying powers, its long string of quarterly revenue reductions doesn't exactly suggest its planned cloud-and-AI-fueled rebound is imminent. ®"

    Right. And the layoffs that they can't hide, nor the mass exodus of Server Hardware Support Techs to HPE, isn't a vote of confidence on the part of escaping staff who prefer not to go down with the ship...

  5. Steve Davies 3 Silver badge

    I wonder how much the lost on Apple stock?

    It has climbed steadily these past few months. From around $120 to over $150.

    Just saying... The job of the pension funds is to make sure that they have enough in the bank to meet future demands. Selling out of a stock that is clearly tipped by Wall St to rise well, well before it gets to its peak is IMHO lunacy.

    Not a promotion of Apple but just stating facts about an investment in the fruity company.

    1. Jim Mitchell

      Re: I wonder how much the lost on Apple stock?

      The goal of a pension fund isn't to make zillions of money, ie maximize return, it is to guarantee enough is there to meet obligations. This favors moving to the lowest risk investment that will have enough return.

    2. Anonymous Coward
      Anonymous Coward

      Re: I wonder how much the lost on Apple stock?

      Who says Apple hasn't reached its peak? Are you able to tell the future, and know it is going to hit $175? If so, I wish to subscribe to your newsletter :)

      I have a ton of Apple stock, so I'm happy about the rise, but if I wasn't in it for the long haul (my average cost is a bit under $40/share) I'd probably be taking profits right about now.

      Anyway, as Jim says this is a pension fund, not a hedge fund. When one of your larger holdings goes up a lot you'll generally want to reduce holdings or sell entirely to reduce risk as the higher a stock goes above its long term running average, the larger its potential drop is in the event of a market shock like a major terrorist attack.

  6. GruntyMcPugh Silver badge

    "Firstly, IBM's pension fund deciding that holding IBM stock isn't the best way to meet its obligations is hardly a vote of confidence in the company's future."

    The pension fund is not part of the IBM Public Relations Dept. It's not there to wave a little IBM flag, it's there to make money for it's investors, IBM staff past and present. It seems to be pretty well managed, I've seen my investment increase significantly in the years since I have left, and of course, I'm no longer contributing to that pension fund. If this move maintains that level of growth, it's all good.

  7. earl grey
    Facepalm

    Fiduciary responsibilities and all

    Yes, the fund managers have responsibility to the pensioners to keep the value and returns up there and keep the payout levels if they can. You sure don't want another Enron.

    1. Just An Engineer

      Re: Fiduciary responsibilities and all

      That is why over here they changed the laws after Enron. Firstly 410K plans in many cases gave just 2 options, Company Stock or a guaranteed interest account. So you know where the "growth" was, and most people chose the company stock. The collapse of Enron and other companies around that time, Lucent Technologies and MCI WorldCom, come quickly to mind, made this change imperative. Only a certain percentage of a pension fund can be company stock, and it is a very low percentage. Also the company can no longer dictate that the 401K must be in one or the other, GI or Company Stock.

      1. Anonymous Coward
        Anonymous Coward

        Re: Fiduciary responsibilities and all

        The 401k is the worst investment you can piss your dollars or pounds into. They take out so many charges that even if the fund vehicles have solid growth, that comes out in extra charges. Take a look, if you have a 401k, that money is not heading your way. If anything, get it all in cash or salary. Stocks, if you're feeling lucky, but just get cash and do your own investing. Investing in indices seems to be the way to go, unless you own a hedge fund, then YMMV. 401k is a massive ripoff of the casual investor, and they like it like that.

  8. 2Nick3
    WTF?

    Not a big deal for the value of the IBM Pension Fund

    Based on a share price of $180 (about the high for the year), the value of IBM stock in the fund went from just under $15m to $2.2m. So for the >$100b (fund value at the EOY 2014 per the 10-K filing), the portion of IBM stock in the IBM Pension Fund went from 0.015% to 0.002%.

    So the IBM Pension Fund never really had much faith in IBM stock in the first place.

    1. Anonymous Coward
      Anonymous Coward

      Re: Not a big deal for the value of the IBM Pension Fund

      So the IBM Pension Fund never really had much faith in IBM stock in the first place.

      Not really IMHO. Just evidence of a very diverse portfolio. My former employer's PEnsion fund is like this. IT has less than 0.5% of it invested in the parent company.

  9. Chris Evans

    All your eggs in one basket?

    Whilst nick has pointed out that 82,000 shares is insignificant regarding the total fund. I've read of quite a few Pension funds that had more than 10% in there own company. I wonder if there should be a legal limit of 10%. If a company goes bust the last thing you want is to also lose your pension.

    1. Anonymous Coward
      Anonymous Coward

      Re: All your eggs in one basket?

      " If a company goes bust the last thing you want is to also lose your pension."

      This is true of course, but the time many companies go bust is during a recession, when other companies are also going bust. This is why you need to hold bonds and even cash. I'm not going to bore you with my own portfolio, which is described as "balanced", but there are circumstances in which a company pension fund could be justified in holding quite a lot of its own shares - e.g. holding Apple shares is, to a degree, like keeping a lot of cash in foreign currencies.

  10. Anonymous Coward
    Anonymous Coward

    Could be normal rebalancing

    If you try to maintain a particular stock/bond percentage, when stocks have been going up a lot (not IBM, but others mentioned like Apple have) then you'll need to sell stocks and buy bonds to get back to your desired percentage.

    Perhaps also they are changing their allocations to a lower percentage of stock, believing that the market is due for a correction. I'm not a big believer in market timing, but if you're going to try it, now is probably a pretty good time to reduce your stock holdings.

  11. Anonymous Coward
    Anonymous Coward

    Now how is my pension doing?

    It's interesting how everyone slags IBM for being in thrall to Wall St.

    I sense a little hypocrisy once it starts to affect our pensions; if your pension was poor due to the fund managers not doing their job who would be the first to complain? Probably those same staff.

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