UK roundup: London CIV, TPR, Coats Group, Vesuvius, PIC
London CIV, the pooling project for the UK capital’s 33 borough pension schemes, has added global equity and emerging markets funds to its offering.
The pool, which now manages more than £5bn (€5.7bn) through eight funds run by external managers, has appointed Janus Henderson Investors to run an emerging markets portfolio. Hugh Grover, chief executive of London CIV, said the group expected roughly £250m to be transferred to the fund when it launches in July.
Longview Capital, a London-based global equity manager, will begin running roughly £500m of assets next month for what will be London CIV’s fourth global equity offering. The boutique firm’s appointment was confirmed earlier this year. Grover said interest in the mandate could push it towards £1bn.
London CIV plans to launch a global equity income fund run by New York-based Epoch Investment Partners, and a sustainable equities fund run by RBC, in September. Low volatility and low carbon strategies were also being discussed, Grover said.
The pool has also been researching fixed income, Grover said, aided by the recent appointment of Larissa Benbow as fixed income manager. London CIV has targeted early 2018 for its first fixed income mandates, but the chief executive indicated this could be brought forward to meet demand from the borough pension funds.
Regulator secures £1bn through anti-avoidance powers
The Pensions Regulator (TPR) has agreed a £74m settlement with thread manufacturer Coats Group regarding the funding of its defined benefit (DB) schemes.
TPR stepped in last year to ensure the proceeds of asset sales by Coats were used to fund a sizeable deficit across three DB schemes connected to the firm.
In December it agreed to pay £255m into two schemes, with the third scheme’s settlement being announced this morning.
The Staveley Industries Retirement Benefits Scheme has roughly 3,700 members and an estimated shortfall of £85m, the regulator said in a statement.
Combined with its agreement with former BHS owner Sir Philip Green earlier this year, it means TPR has now secured more than £1bn to fund DB pension schemes using its anti-avoidance powers.
Nicola Parish, executive director of frontline regulation, said: “The ongoing trading operations of Coats have improved and are sufficient to provide ongoing funding for the schemes. This is an excellent result for scheme members, bringing greater certainty that future benefits will be paid in full.
“Today’s report shows that even though our concerns about the funding of the schemes were enough to launch anti-avoidance action and issue warning notices, we maintained a strong working relationship with Coats and the trustee, allowing us to be flexible and achieve a fair resolution.”
Engineering group agrees ‘roll-in’ de-risking plan
The pension scheme of engineering group Vesuvius has completed a buy-in transaction with Pension Insurance Corporation (PIC), bringing the level of the pension fund now insured to 50%, representing more than £400m of liabilities.
Vesuvius and PIC initially struck a £320m buy-in arrangement in 2012, with subsequent tranches ‘rolled in’ on an annual basis, subject to meeting certain criteria. The two groups have agreed to make this arrangement “open-ended”, meaning the trustees of the scheme can continue to add future tranches of pensioners to the insurance arrangement.
Tristan Walker-Buckton, senior actuary at PIC, said the trustees had been “forward thinking and proactive”, as one of the first pension schemes to employ the “automatic roll-in” option.
Guy Young, chief financial officer of Vesuvius, said: “De-risking the UK plan in this way, by removing the inflation, longevity and interest rate risks for the insured liabilities, will reduce still further the level of volatility to which Vesuvius is exposed in future pension funding costs through its sponsorship of the UK plan. This latest buy-in agreement represents a further demonstration of the company’s intention to work with the trustee to de-risk the UK plan in a managed way.”