The trustees of the KBR UK Pension Plan have appointed Legal & General Investment Management (LGIM) as fiduciary manager to oversee the pension investments of over 9,000 plan members.
KBR Pension Plan is part of KBR which provides science and technology solutions to governments and companies.
LGIM will also take over management of the plan’s strategic asset allocation and will assist in restructuring the fund’s private markets portfolio to further improve portfolio liquidity in preparation for buyout.
The initial transition of over £1bn of assets was completed by LGIM in December 2023, making it one of the “largest mandates of its kind”, according to the investment manager.
LGIM said that part of the mandate focuses on investing in bonds that are “matching-adjustment eligible” under the insurer solvency requirements.
The firm added that, being a part of parent company Legal & General, it can leverage its expertise in endgame solutions as well as insight from and relationship with the insurance buyout business, Legal & General Retirement Institutional. This, it said, will help ensure KBR is appropriately positioned to transfer liabilities to an insurance company when it buys out.
As fiduciary manager, LGIM said it will offer increased operational efficiency within the KBR’s collateral management processes, as more liquid assets are managed alongside liability-driven investment (LDI), increasing the resilience of its LDI portfolio to potential future Gilt market volatility.
The outsourced investment model allows the trustees to focus on long-term strategy, while delegating day-to-day portfolio management to LGIM.
Dougal Monk, chair of trustees at KBR UK Limited Pension Plan, said that given the plan’s maturity, KBR felt the time was right to review its investment arrangements and find the best partner to help it with the next phase of its journey.
“Following a rigorous selection process, we chose LGIM based on their depth and breadth of expertise and experience in helping maturing schemes,” he added.
Monk also noted that it was important that its fiduciary manager was able to carefully manage portfolio liquidity, adding that LGIM’s approach stood out in that regard.
“Their ability to implement a bespoke buyout-ready credit portfolio puts the plan in a very strong position for the future,” he explained.
Tim Dougall, head of delegated solutions at LGIM, said that many mature schemes are looking to improve the liquidity of their investment portfolios, and it was increasingly important for trustees to consider how best to structure their bond portfolios to seek to reduce risk on a buyout basis.
“We are very pleased to be bringing LGIM’s full expertise to support the plan as part of a bridge to buyout,” he added.
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