Scottish Widows Enters De-Risking Market | Chief Investment Officer

The UK has today welcomed the latest entrant to the de-risking market: Scottish Widows.

The company, which is part of Lloyds Bank, sealed a £400 million ($604 million) buy-in with the Wiggins Teape Pension Scheme, insuring retired former employees of paper manufacturer Arjowiggins.

The transaction covers roughly two-thirds of the pension’s liabilities, Scottish Widows said. It made use of an “innovative premium payment process,” which allowed the pension to secure a price and pay it over “an extended execution period”.

Emma Watkins, director of bulk annuities at Scottish Widows, said the company had “worked closely with the trustees and their advisers to tailor the arrangement to meet the scheme’s needs”.

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Watkins joined Scottish Widows in June from consultant LCP to build the bulk annuity team. She told CIO in April that the company’s high-profile brand, as well as that of its parent company, would help with attracting clients.

“The relationship with Lloyds is clearly key,” she added. “With buy-ins and buyouts, trustees want to work with someone they and the corporate sponsor can be comfortable with.”

A European private equity trade body has published new disclosure standards in an effort to tackle investors’ concerns over fees and reporting.

“Institutional investors demand high standards on issues such as responsible investment and fee transparency.”Invest Europe’s 2015 Professional Standards Handbook includes “substantially updated” guidelines for fee disclosure, the organization said in a release.

The publication arrives as pressure mounts on private equity managers, with several high-profile investors scrutinizing the fees they have paid out.

In addition, the US Securities and Exchange Commission last month named fees and expenses for private equity and hedge funds sectors as a key priority for 2016. The regulator has already fined KKR and Blackstone this year for failings in charge disclosures.

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While Invest Europe requires members to comply with a six-point code of conduct, its guidance on fees is voluntary. The handbook calls firms’ full disclosure of fee terms “recommended.”

Firms implementing these best practices would provide a “detailed breakdown” of all fees paid directly or indirectly by portfolio companies to the general partner (GP) and related entities or individuals; disclose management fee terms; differentiate costs borne by the investor and those paid by the GP; detail the treatment of fees paid by portfolio companies; and state carried interest arrangements.

Marta Jankovic, vice-chair of Invest Europe’s professional standards committee and governance specialist at Dutch pension manager APG, said the new handbook “sets a clear benchmark for all fund managers.”

“Institutional investors demand high standards on issues such as responsible investment and fee transparency,” Jankovic said. As well as fee transparency, the handbook “integrates environmental, social, and corporate governance topics throughout,” she added.

“The rapid growth of the industry over the past decade implies that an increasing number of people are today employed by companies that are wholly owned or controlled by the industry,” according to the industry group’s publication. “An even wider group is increasingly impacted as stakeholders in portfolio companies. This creates the need for a greater level of transparency and disclosure of information by individual GPs and the industry to a wider stakeholder group.”

Invest Europe’s code of conduct requires its venture capital and private equity members to act with integrity, fulfill their promises, disclose conflicts of interest, act in fairness, maintain confidentiality, and do no harm to the industry.

The handbook is available online from Invest Europe.