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 …
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.
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.
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).
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.
"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...
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.
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.
"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.
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.
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.
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.
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.
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.
" 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.
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.
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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