The plate glass manufacturing company Pilkington was until recently one of the last UK companies to operate its pensions scheme with
its own pension fund management team.
Late last year it decided to end this arrangement. It closed its in-house pension fund management team and appointed State Street Global Advisors (SSgA) as transitional managers.
Philip Webb, corporate affairs manager at Pilkington, says the company was simply falling into line with other UK companies: “Really we were following an industry trend, where we felt we could get a better source of advice.”
The Pilkington Superannuation Scheme (PSS) is a hybrid contributory scheme with moe than 3,400 active members and 12,500 pensioners. Currently it has assets of about £1bn. The PSS is entirely separate from the company and set up under a trust. The Pilkington Brothers Superannuation Trustee Ltd administers the scheme.
Until December 2003 the PSS assets were managed by a team of five investment managers: a chief investment officer, two senior investment managers responsible respectively for global bonds and US equities and two investment managers responsible for UK equities.
The PSS adopted a scheme-specific benchmark at the end of 2000. In 2002 the fund had an annual return of minus 13.6% against the benchmark return of minus 12.65%. In 2003 the fund returned 13.5% against the benchmark’s 14.4%.
Late in 2003 the trustees of the PSS carried out an exercise with the UK-based pensions investment consultants Watson Wyatt to help them decide whether to retain this small in-house management team or to move to external management.
The trustees came down on the side of external management. Working again with Watson Wyatt they planned to manage the transition in two stages. In the first stage, the management of the assets would be moved initially to a single manager. In the second stage, the trustees would choose, over time, other specialist managers to join the programme.
Pilkington chose SSgA to be the manager at the initial stage. SSgA was already one of the two asset managers managing UK equities, European equities, fixed income ad index linked bonds on a passive basis. The portfolio to be transitioned was a classic balanced portfolio of equities and fixed income, UK and overseas.
Nigel Wightman, managing director at SSgA , says the first step was to transition the assets “Taking on the assets meant essentially transitioning them initially into an indexed tracking form. The transitioning happened quite quickly over a couple of days.
“We have been working with them since as they look for new specialist managers. Once Pilkington and their investment adviser have selected
the managers we will then work
with them and with the consultant
to provide the assets for the new portfolios.”
Even after the second stage of asset disbursement, Wightman says that SSgA expects to retain a respectable share of the business. “We expect to remain as the core manager of a balanced passive portfolio. with approximately half of the assets.
The Pilkington trustees have not yet chosen any specialist managers, says Webb. “At this stage we haven’t made any decision to move away from a passive approach to investment. This has still be considered by the trustees and no decision has yet been made,” he says.