When the Financial Accounting Standards Board (FASB) adopted in 2006 a new accounting standard, FAS 158, that mandated fair-value reporting and considerably more transparency on pension plan liabilities and assets, few companies seemed to take the threat immediately to heart. Even after passage of the Pension Protection Act (PPA) that same year, which imposed strict funding standards on plans, many companies didn't do much to prepare.

Don't include VWR International LLC, a $3.5 billion West Chester, Pa.-based distributor of laboratory equipment, in that group. VWR saw the 158 writing on the wall and forged ahead. In the third quarter of 2007, it sold most of its stocks and reallocated the proceeds into longer duration, fixed income investments. The previous mix of 71% equity, 21% fixed and 8% cash mix became a mix of 19% equities, 37% cash and 45% fixed-income, explains Scott Smith, VWR's treasurer. The key for Smith and VWR was to find suitable hedges against volatility and interest rates. They believe they found that in liability driven investment funds (LDIs) offered by Barclays Global Investors (BGI).

In some ways, VWR was unusually lucky, but it was also a case of judicious planning. Smith says the company unloaded stocks at or near the market peak, and transferred the money into LDIs as the subprime crisis gathered momentum. "It's happened exactly as we expected," says Smith. But what if the market had continued to climb? "We would have been comfortable with that," he says. "We made a conscious decision that mitigating our U.S. plan's risk trumped potentially greater returns–and potentially lower future funding costs."

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