UK – The 10 billion-pound (14.9 billion-euro) British Coal Staff Superannuation Scheme has aligned with the BT Pension Scheme on governance issues, with an outsourcing deal with Hermes.
The BCSSS said it has appointed Hermes – owned by the BT scheme - to help undertake its share ownership responsibilities across most of its global equity investments. The coal scheme said the tie-up would “maximise” the two schemes’ power.
Hermes would “help undertake its share ownership responsibilities across the majority of its equity investments globally”. Financial terms of the deal were not disclosed.
It would use Hermes’ Equity Ownership Service as an overlay for its six billion pounds of equity holdings.
The scheme said it chose Hermes “because both have for many years taken great care to exercise share ownership responsibilities” – with Hermes’ skill coming from its work for the BT scheme. “This model has been adapted to encompass BCSSS' external equity managers,” the coal scheme said.
And it will invest 100 million pounds in the Hermes Focus Funds in the UK and Europe, which seeks to identifying companies which are discounted by the market as a result of strategic, governance or financial weaknesses.
"As trustees we believe that corporate governance and stewardship are not only a duty of share owners but also an opportunity to add value,” said Sheila Gleig, chair of the coal scheme.
“We believe that this arrangement with Hermes provides the most effective way achieving this in a consistent manner across our equity holdings.”
She added: "Aligning ourselves with another large share owner maximises the power of both schemes to engage with the companies in which we invest and should provide a model for other pension funds, large and small.
“Alignment across pension funds also helps to send fewer potentially confusing signals to those companies.”
She added that it solves problems created by the new manager structure adopted last year which meant that the scheme’s holdings in the same company might be managed by several asset managers.
Schroders and First State will continue to provide active stewardship of its holdings in UK small cap and emerging markets respectively.
Meanwhile the Local Authority Pension Fund Forum has released a survey of 55 pension funds which it said shows how much pension funds rely on their fund managers to achieve best practice on shareholder activism.
It found that 64% of the pension funds in the sample delegate all shareholder engagement activities on UK equities to an external fund manager.
It said: “The heavy reliance of many pension funds on their fund managers to ensure compliance with ISC Principles has implications for fund managers’ transparency and accountability to their clients.”