mast image

Special Report

Impact investing

Sections

BP Pension Fund grows assets by 14% after bumper equity returns

Related images

  • Oil platform

Related Categories

The BP Pension Fund grew 14% over the course of 2013 as it shed its deficit through strong returns on its majority equity portfolio.

It grew in size to £19bn (€22.7bn), up from £16.6bn, taking its coverage ratio back above 100% after two consecutive years of deficit.

Its funding ratio at the end of 2013 was 101%, up from 94% at the end of 2012 and 92% in 2011.

Despite paying out more than £500m in benefits, the fund’s investment portfolio provided a net return of £2.5bn but saw £123m of withdrawals from members.

<

BP’s internal investment management team secured positive returns in all classes except some international equities and its UK Gilt holdings.

All investments are managed in-house except Sterling fixed income allocations, which Baillie Gifford and Goldman Sachs Asset Management manage.

Its North American equity portfolio returned 28%, which the fund said was due to the US Federal Reserve’s “easy money policy” boosting asset values.

“Risk assets – equities in particular – enjoyed supernormal returns in 2013,” the fund said.

Japanese and European equities both returned 25%, and UK equities 20%, but the fund suffered in other Asian and emerging markets.

It also saw strong returns from property (12.1%) and private equity (14.1%) but experienced negative returns for UK Gilts (5.8%) and some international equities (3.8%).

The fund now holds 58% of assets in equities, 7% in property and 14% in pooled investment vehicles.

However, the fund’s equity allocation fell 2 percentage points as the scheme increased its index-linked fixed income exposure by 60%.

It also increased its use of pooled investment vehicles and expanded its directly held property portfolio, which included the purchase of a £27m supermarket from the M&G Secured Property Income Fund.

At the end of 2012, the trustees acted to increase the fund’s liability-driven investment programme, seeing derivatives, fixed interest and index-linked exposure increase over the year.

It now holds £17.3m in derivative contracts, up from £3m, after the trustees updated the statement of investment principles to move 3% of assets from growth to liability matching.

Despite the bumper returns from its equity portfolio, overall annual return on investment was 14.7% – 30 basis points below the fund’s benchmark.

The BP Pension Fund also strengthened its in-house team with two senior hires from Aon Hewitt and the Pension Protection Fund.

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2548

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 300-400m.
    Closing date: 2019-07-30.

  • QN-2549

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 300-700m.
    Closing date: 2019-07-30.

  • QN-2550

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2551

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2552

    Asset class: Fixed Income, High Yield (Active).
    Asset region: High Yield (US).
    Size: CHF 500-600m.
    Closing date: 2019-07-29.

  • QN-2553

    Asset class: Fixed Income, High Yield (Passive or Passive Enhanced).
    Asset region: High Yield (US).
    Size: CHF 500-1'100m.
    Closing date: 2019-07-29.

  • QN-2554

    Asset class: Global Real Estate (Equity, unlisted Funds).
    Asset region: World (ex-Switzerland).
    Size: CHF 200 mn (potential for further growth).
    Closing date: 2019-08-07.

  • QN-2556

    Asset class: FX Hedging.
    Asset region: Global.
    Size: Mandate size of CHF 1.5 bn.
    Closing date: 2019-08-09.

  • QN-2557

    Asset class: All/large Cap Equities.
    Asset region: China A-shares.
    Size: Unit linked platform (0m USD in initial investment).
    Closing date: 2019-08-01.

Begin Your Search Here
<