UK - The Merchant Navy Officers Pension Fund (MNOPF) has completed another £100m (€116m) buy-in of pensioner liabilities, while MetLife Assurance has warned differing approaches to risk by trustees and sponsors could be preventing holistic risk management policies.
Elsewhere, the London Borough of Lewisham and the West Midlands Pension Fund have both invested in Investec Asset Management's global commodities and resources strategy.Lucida has confirmed that it has completed a buy-in transaction wtih the trustees of the MNOPF for the £100m pensioner liabilities of the £1.1bn 'old' section of the penson scheme.
The MNOPF is split into two sections - the 'old' section that closed to new members in 1978 and the new section for post 1978 members - with combined assets of approximately £2.66bn at the last actuarial valuation on 31 March 2009.
The latest deal follows a £500m buy-in deal agreed with the insurer in September last year (See earlier IPE article: MNOPF completes £500m buy-in with Lucida). As a result, MNOPF trustees, who were advised by Towers Watson and lawyers Baker & McKenzie, have now insured approximately two-thirds of the future pension payments of around 22,000 retired members.
Andrew Waring, chief executive of MNOPF, said: "The original contract reflected the trustee's focus on security and allowed us to insure more benefits in the same way at a later date. When the trustee was ready to take another big step towards de-risking the fund, it made sense to extend our agreement with Lucida.
"Working with Towers Watson, we were able to design a trigger mechanism that enabled us to recognise and capture this de-risking opportunity quickly as markets moved in our favour."
Paul Kitson, project lead and senior consultant at Towers Watson, the firm acting as the MNOPF's delegated CIO, said: "Like many other multi-billion pound pension funds, MNOPF is looking to remove risks in stages. Market volatility means opportunities to de-risk can disappear as quickly as they appear. The key is to make sure you know when the price is right and can move quickly when it is."Elsewhere, findings from MetLife Assurance's UK Pension Risk Behaviour index showed that while pension trustees and scheme sponsors are both taking a broad view of risk management, they are not necessarily integrating their approaches.
The survey of 47 scheme sponsors and 42 trustees revealed the two groups are most likely to focus on factors they have responsibility for, with trustees more often concerned with investment-related risks, for example, such a asset diversification, and asset and liability mismatches. Meanwhile, employers tended to focus on liability and business-related risks, including longevity and the employer covenant.
Figures showed 79% of sponsors and trustees are confident in their ability to manage scheme risks, however MetLife argued a "divide and conquer" approach could cost defined benefit (DB) schemes money, waste time and cause potential harm to the reputation of sponsors.
Dan DeKeizer, chief executive of MetLife Assurance, said: "A truly holistic view of risk management on the part of both trustees and scheme sponsors requires both sides to fully assess and prioritise all risks, even those for which they are not primarily responsible.
"Our inaugural study should encourage scheme sponsors and trustees to communicate regularly about a full range of issues that affect their schemes, especially as they face increasing risks ranging from the quality of member data to scheme governance and the employer covenant."The London Borough of Lewisham and the West Midlands Pension Fund have invested a combined total of $100m (€77.4m) in the Investec Global Commodities and Resources Strategy, which invests across the entire commodity spectrum with a total return objective. (See earlier IPE article: Lewisham targets commodities in revised strategy)
Investec claimed the strategy, led by Bradley George, combines fundamental analysis of underlying commodities with a bottom-up stock-picking approach. The team includes specialists covering precious metals, base metals, energy and soft commodities.
David Aird, managing director for UK distribution at Investec, said: "We have responded to the needs of institutional investors who seek an active management approach to investing in commodities and resources, combined with flexible investment parameters and a skilled, experienced management team.
"We believe there is an exciting investment opportunity that can be captured by active management of this asset class and we want to help our clients to access this."
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