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UK schemes unfazed by Northern Rock debacle

UK - UK pension funds remain confident about their funding positions, despite a reported hit for fund manager Baillie Gifford in its shareholding of UK bank Northern Rock.

Baillie Gifford, fund manager for investors such as the £1.66bn (€2.4bn) John Lewis pension fund and the £2.3bn Cheshire County Council scheme, is believed to have lost £250m  because of a slump on Northern Rock's share price  - falling 55% in value in two days from its 639p close on Thursday to 282.5p yesterday evening.

Press reports this morning state the Edinburgh-based fund manager is Northern Rock's largest institutional shareholder with a 5.98% stake held across a number of funds and investment trusts.

Mervyn Harvey, head of pension at the John Lewis pension scheme - which has a significant UK passive holding via State Street - said today: "People with UK passive holdings inevitably have a proportionate part of Northern Rock."

However, the fund is adamant schemes occasionally take a hit as part of the normal course of the investment game.

Likewise, Mark Wynn, fund manager a the Cheshire County Council pension fund, told IPE his fund had not been substantially hit through investing with Baillie Gifford.

"We probably do hold Northern Rock shares at the moment, which means we will have taken a hit, but for us it is part of a diversified portfolio that Baillie Gifford manages on our behalf and their performance has been for us satisfactory over a long period of time," commented Wynn.

He added: "On Northern Rock specifically, yes we do hold some shares in them and we have will taken a share of whatever losses Baillie Gifford has made, but it will be a very small proportion of a very diversified portfolio."

Nonetheless, the fund is keeping a close eye on developments: "It is not something we are not worried about obviously," said Wynn.

With share prices recovering however, the fund does not expect any further losses.

Other substantial Northern Rock shareholders are thought to be Scottish Widows, Legal & General, Fidelity and  F&C.

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