UK - The £9bn (€13.6bn) internally-managed British Airways pension schemes are considering whether to open to third parties, and Hermes Pensions Management has said it would look at investing in them if this happened.
John Birch, secretary to British Airways pension trustees, which control two funds, the Airways Pension Scheme (APS) and the New Airways Pension Scheme (NAPS), said the internal fund managers at BA Pensions Investment Management could “take on additional assets” from third parties but it would not set up a marketing department to approach investment consultants.
Instead, Birch said it might consider partnering other pension funds but internal discussions had not advanced into formal proposals. The option at looking at taking in third-party funds was welcomed by the UK’s only pension fund running external money.
Charlie Metcalfe, deputy chief executive at Hermes Investment Management, for the forthcoming July IPE issue said: “The term mutual is a neat description as pension funds are not in competition. BA has been considering its future [whether to remain internally-managed.”
To encourage other internal pension funds thinking of opening to third-parties Metcalfe said Hermes was “prepared to outsource large active equities to other funds managers, such as BA, if it was internally managed. It would be silly not to look to see if they can prove a good investment process and track record.”
Although the BA schemes are waiting for formal board approval to remain internally managed, Birch said the trustees’ view was that internal management was the best option for the medium term.
The key factors in the decision, according to Birch, were that “costs were good at 8 to 8.5 basis points, with performance exceptional. External management would be three or four times that depending on the asset class and with poorer performance compared to internally-run money.”