Institutional Asset Manager Newsletter 15.12.23

Good news for the DB pension system

The end of the year is tantalisingly close and as we approach the final stretch, there is good news for the UK’s defined benefit pension system.
The Pension Protection Fund (PPF) reports surpluses for the second year running – largely thanks to an inadvertent gilt crisis caused by a September 2002 mini-Budget – leaving trustees in the enviable position of having options with how to proceed towards their endgame.
Rather than being forced down the buyout route - which can be costly and with relatively limited numbers of places open at insurers highly competitive - schemes can consider running on and using their surpluses more judiciously.
This according to Serkan Bektas at Insight Investment, gives corporate sponsors who have so slavishly plugged deficits in these unforeseen gold-plated plans, some respite in their obligations, safe in the knowledge that liabilities are secured through investment in contracted assets while surpluses can be used to provide considerable buffers.
Bektas goes so far as to suggest that sponsors use their strengthened position to negotiate better terms with the PPF, arguing that its current terms which insure just 90 per cent of active deferred members’ benefits in the event their scheme defaults, is insufficient.
"What value would we ascribe to house insurance that pays 70 per cent of the value of the house?" Bektas asks. "We think there is good logic that the protection should be closer to the true exposure, and we think that the PPF is exposed to very different levels of risk [from underfunded DB schemes] than it has been in the past, and that should be reflected."
Read more of Insight Investments’ views on the future for DB schemes’ endgame strategies here.
In other news and coinciding with the close of the COP28 Summit in the United Arab Emirates, BNP Paribas has launched a Climate Impact Infrastructure Debt fund as part of its commitment to allocate an average of EUR 1 billion per year to positive impact investments by the end of 2025.
Managed by BNPP AM’s Private Assets division and classified as Article 9 under SFDR the fund has secured three investments, with financing for a low-carbon energy producer, a green-sourced district heating platform and a portfolio of onshore wind farms.
Finally, we bring you news that Aubrey Capital Management and Itaú USA Asset Management, have joined the Group of Boutique Asset Managers an initiative designed to give smaller, specialist houses a stronger footing on the global stage.
The two additions join the likes of First Avenue and Chartwell Capital in bringing together boutiques to collaborate and share ideas, and while not attempting to do battle with the likes of BlackRock, there seems no harm in having safety in numbers.
Gill Wadsworth, Editor
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