Superfund Clara Pensions has gained Wilton Re, a US life (re)insurance company owned by the Canada Pension Plan Investment Board (CPPIB), as a capital partner.
Wilton Re Overseas Limited will thereby join global investment firm Sixth Street as a capital provider.
Adam Saron, chief executive offficer of Clara-Pensions, said: “Wilton Re’s investment represents a clear vote of confidence in consolidation, The Pension Regulator’s regulatory regime and Clara’s member-first model.”
Chris Stroup, chair of Wilton Re’s board of directors, said: “We have tremendous respect for the work that Adam and his team and Sixth Street have completed thus far in preparing Clara to succeed.”
The closing for Wilton Re’s initial capital funding is subject to customary antitrust approvals and is anticipated to occur in the fourth quarter of 2020. Sixth Street was announced as an investor in Clara in late 2018, when it was still in a partnership with US-based private equity giant TPG. Sixth Street and TPG have since separated to become independent, unaffiliated businesses.
Clara is currently going through the pensions regulator’s assessment, which CEO Saron yesterday during an industry conference said was “extremely thorough”.
Clara seeks to serve as a bridge to the insured market for defined benefit (DB) schemes. Its model envisages that upon a scheme entering Clara, its assets and liabilities are supported by capital from Clara’s capital providers, “thus securing a lower-risk journey to buy-out”.
Money is only returned to the capital providers after Clara has fully secured promised benefits for its members.
The entities behind superfunds are commercial enterprises and therefore have certain risks not common in a traditional DB scheme, key of which is value extraction.
In its interim guidance the pensions regulator said superfunds should not be allowed to extract funds from the scheme or capital buffer until members’ benefits are bought out in full. The position is to be reviewed within three years.
CPPIB acquired Wilton Re in 2014.
Correction: An earlier version of this article referred to Sixth Street as a previous subsidiary of TPG. This was incorrect. Sixth Street was a partner of TPG, not a subsidiary.