UK - F&C Asset Management has announced plans to acquire specialist investment firm Thames River Capital, while JP Morgan Worldwide Securities Services has been awarded two custody mandates.
GKN has outlined plans to cut future funding liabilities in its defined benefit (DB) and reduce its existing deficit, and Hewitt Associates has warned 20% of all DB schemes in the UK are currently closed and this could double over the next year.
Thames River Capital is a multi-strategy asset management business with nine investment teams covering asset classes such as global bond, fund of alternative funds, multi-capital and quantum, and an estimated £4.2bn assets under management at the end of March 2010.
The sale excludes Nevsky Capital, which runs long-only and long-short strategies. The subsidiary is being retained by Pacific Investments and the interest held by Thames River Capital will be demerged before the sale is completed.
F&C claimed the acquisition would accelerate the diversification of the group beyond its traditional core businesses by broadening the range of specialist products available including absolute return funds. Alain Grisay, chief executive of F&C, which became independent from Friends Provident last year, also said the deal would "accelerate the shift to higher fee margin products and enhance our distribution capabilities". (See earlier IPE article: F&C saw assets drop ahead of independence)
The appointment by Hewitt means JP Morgan will provide custody, transition management, accounting, performance measurement, FX, compliance, securities lending and trustee services to pan-European DB pension schemes advised by Hewitt Delegated Consulting Services.
Hewitt's delegated consulting service allows investment specialists to efficiently manage and execute a scheme's investment policy set by the trustees, which can entail rapid responses to changing market and/or solvency conditions. JP Morgan's custody solution was designed specifically to meet the requirements of Hewitt's delegated consulting model.
The £2bn John Lewis Partnership Pensions Trust has also appointed JP Morgan to provide custody and other related services for the pension scheme.
In its interim management statement for the first quarter of 2010, GKN confirmed changes to the benefit structure of the scheme had been implemented, which could reduce future scheme funding liabilities by £80m.
GKN also revealed it had agreed an asset-backed cash payment scheme with trustees that will provide £30m year to the scheme for a period of 20 years. It noted this will also act as an asset of the scheme in the triennial valuation with a value of £331m, and if the scheme moves into surplus in the future these cash payments will be applied to ongoing scheme service costs.
Research from Hymans Robertson on FTSE 350 pension deficits, published last month, highlighted GKN was one of five companies that had a pension deficit larger than its market capitalisation, and would take more than five years of full earnings to pay off the debt. (See earlier IPE article: FTSE 350 deficits would take up to five years' earnings to clear)
Nearly 20% of the UK's DB schemes surveyed had already closed to accrual, with the figure expected to increase significantly - potentially doubling - over the next 12 months. Freezing schemes by closing them to future accrual is an accelerating trend, Hewitt claims, but other approaches being considered by respondents included capping growth in pensionable pay, or moving to a career average (CARE) scheme.
Tony Baily, principal consultant at Hewitt, said: "There are often good reasons for freezing plans. However, the recent wave of plan freezes potentially puts pressure on other companies simply to follow suit - without really understanding whether this best meets their business objectives and constraints."