The UK’s banks could pool the assets of their pension funds to create a scheme with the ability to compete with large Canadian and Asian investors, the head of Santander’s £10bn (€13.7bn) UK fund has suggested.
Antony Barker, chief pensions officer at the UK bank, said he could imagine a time would come when the industry would pursue a sector-wide arrangement, as there was no competitive advantage to be gained from the operational management of pension funds.
He argued in favour of pooling, as it would allow for the sector’s pension assets to pursue a different investment strategy.
“From a pension fund perspective, we [the Santander UK pension fund] are probably more transactional than most,” he told attendees at the recent joint IPE/IP Real Estate Real Assets & Infrastructure conference in London.
Barker added that the pensions sector was often unable to trade, due largely to a lack of sufficient in-house staff.
“I can envisage a time where it makes sense to have a national Bank Pension scheme,” he added, citing the Dutch market’s industry-wide funds as inspiration.
“The operation of a pension scheme is not a competitive element,” he added, “and [a single scheme] would actually pool together a £100bn portfolio that could compete directly with the Canadian and Asian investors to get involved in these major projects.”
Across the UK’s main retail banks – HSBC, Barclays, Lloyds Banking Group, Santander and Royal Bank of Scotland Group, which also owns NatWest – assets within their defined benefit funds approached £130bn at the end of 2014.
Germany has long had a pension fund for the financial services sector.
BVV, founded more than 100 years ago, is the largest Pensionskasse, with €25.1bn in assets, second only to the Bayerische Versorgungskammer, with €62bn in assets.
Barker went on to outline the benefits of a more proactive approach to investment, arguing that the Santander UK Group Pension Scheme – itself a merger of six funds consolidated into a master trust structure in 2012 – had begun approaching investments more akin to the strategies pursued by endowments, lowering its equity exposure to around one-fifth of assets.
He said the approach allowed for the acquisition of “material” stakes when investing.
“We typically like to take 20-25% holdings, which gives us access to the board,” he said.
“Therefore, we are able to direct management as a very interfering limited partner rather than simply trying to apply some rules of either tilting the portfolio or voting engagement.”
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