Round-up of the latest mandates and buyouts in the UK institutional investment markets.
French civil service pension fund awards €350mn worth of mandates
The French civil service pension fund (ERAFP) has awarded €350mn worth of mandates as part of a move to take up new investment freedoms granted by the government in late 2014, this consists of a €150m infrastructure mandate and a €200m private equity mandate. The mandates were put out to tender early last year. Ardian France won the infrastructure mandate and the private equity mandate was won by Access Capital Partners. The €26bn pension fund said the infrastructure mandate is part of its aim to diversify by using “some of its long-term savings to develop sustainable assets that drive economic development and the energy transition and are useful to future generations”. It is a mandate to invest in unlisted, vital, public infrastructure assets that are or will be built mainly in EU countries.
£130m buy-in penned by Smiths Group and PIC
Smiths Group's TI Group Pension Scheme has insured £130m of pensioner liabilities with Pension Insurance Corporation (PIC), bringing the scheme's total insured liabilities to £1bn. The agreement is the second to be completed with PIC after a £170m buy-in in 2013 and covers approximately 1,500 legacy benefits for pensioners and their dependents. The final salary scheme, which closed to future accrual in 2009, had a surplus of £148m on an IAS 19 basis as of 31 July 2016. Assets totalled £1.8bn, compared to liabilities of £1.6bn. 30% of liabilities have now been insured through buy-in policies between the two DB schemes, while 60% has been matched with corporate and government bonds. Aon Hewitt and Mayer Brown advised the trustees, while PIC received advice from Herbert Smith Freehills. Trustee chairman Chris Surch welcomed the deal saying, "We have made considerable strides to completely de-risk the scheme and this remains our long-term aim. Once again our in-house team, our advisers and PIC have been very proactive in helping us achieve our aims."
2017 Buyouts set to break £30b mark
More than £30bn of liabilities will be insured over the year, through buyins, buyouts and longevity swaps, according to Willis Towers Watson. This will see activity return to levels witnessed in 2014 (£39bn) and 2015 (£18bn), following a cooler 2016 (£11bn), as participants adjusted to Solvency II and “back books”. These factors prevented some market participants from new pension’s transactions, while events such as the referendum caused headwinds in the market. In total £9bn of liabilities were hedged through via around 100 bulk annuities in 2016 (£4bn of which was in the fourth quarter), while only £2bn of longevity risk was passed by pension schemes into the reinsurance market. This compares with £12.3bn across 175 bulk annuity deals and £6bn of longevity swaps in 2015. Willis Towers Watson says an overall increase in the regularity and volume of longevity risk being passed into the reinsurance market is allowing smaller schemes to be more active in the longevity hedging market, as they benefit from big scheme pricing, making longevity hedging programmes more attractive.