British Airways Pensions Transfers $30 Billion in Assets to BlackRock

Intensifying regulation, rising operational costs, and increasingly complex investments were cited by the beleaguered airline. 


British Airways Pensions has transferred management of its two main retirement systems totaling nearly $30.4 billion (£21.5 billion) in assets to the outsourced chief investment officer (OCIO) business at BlackRock. 

The transfer is among the largest of its kind in the United Kingdom, the firm said Wednesday. The agreement affects assets under the Airways Pension Scheme (APS) and the New Airways Pension Scheme (NAPS), as well as more than 85,000 members. 

“This agreement is the necessary next step in the evolution of the Schemes as they look to enhance their respective investment strategies, working toward their funding goals,” Roger Maynard, chair of trustees at APS and NAPS, said in a statement. 

“In BlackRock, we have identified an asset manager that will ensure the continued focus on delivering enhanced oversight, investment management, and long-term value for the Schemes in the interests of our members,” he added. 

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Intensifying regulation, rising operational costs, and increasingly complex investments were cited by British Airways as reasons to seek external management for its liabilities. Those pressures intensified last year, when the beleaguered airline carrier put off making pension contributions after the pandemic grounded flights worldwide. 

In February, British Airways sought a deferral for a $637.7 million contribution (£450 million) to September. At the same time, its parent company International Airlines Group, also sought a $2.8 billion (£2 billion) loan guarantee. 

Of course, British Airways had been limiting its defined benefit liabilities for some time. In 2018, the company closed two of its pension funds to future accruals for participants,  and contributions, instead replacing both with a defined contribution plan with flexible benefits. 

The same year, the carrier insured nearly $7.5 billion in assets under the APS system through pension risk transfer to Legal and General Assurance Society, in what was the biggest annuity deal of its kind in the UK at that time. 

Now other employees will also be transferred under the agreement to BlackRock, including all members under the British Airways Pension Investment Management Ltd (BAPIML) and some employees of British Airways Pension Services Limited (BAPSL). More than 85,000 members are under the company. 

The transition of assets was completed June 1. 

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Behavioral Biases Can Cause Real Harm to Investors

Morningstar study finds higher bias levels lead to worse financial outcomes.


Behavioral biases “can cause real harm to our financial lives,” according to a new study from Morningstar that finds that higher bias levels correlate directly with worse financial outcomes.

The report analyzed a sample of more than 1,200 Americans who completed a “bias assessment” survey, and then connected their demonstrated levels of bias with their assets and their overall financial well being.

The report describes biases as “mental shortcuts” that lead people astray when making decisions, and says that investors face several of these biases during the investing process. “When it comes to finances, many of the shortcuts we use in everyday life based on our intuition can bias our judgment and decision-making, leading to unhelpful and even hurtful investment errors,” said the report.

For example, many investors hold on too long to declining stocks because they can’t stomach the thought of selling them and taking a loss. They cling to the hope that some day the stock will rebound and they’ll be able to break even, rather than selling the stock and investing the proceeds in a better investment. This is known as aversion bias.

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“We know that holding on to this investment can lead to worse outcomes in the long term. But we choose to ignore this advice because our gut says not to sell,” said the report. “It can cost investors millions of dollars every year by leading them to hold on to low-quality investments.”

The report focused on four biases included in the “bias assessment” that it said produced “robust results” that were statistically and practically significant across a range of measures:

  1. Present Bias: the tendency to overvalue smaller rewards in the present at the expense of long-term goals.
  2. Base Rate Neglect: The tendency to judge the likelihood of a situation by considering the new, readily available information about an event while ignoring the underlying probability of that event happening.
  3. Overconfidence: the tendency to overweigh one’s own abilities or information when making an investment decision.
  4. Loss Aversion: the tendency to be excessively fearful of experiencing losses relative to gains and relative to a reference point.

Despite these mental handicaps that everyone has to some degree or another, the report cites some simple techniques that can help mitigate mental biases, such as slowing down the decision-making process by setting up decision-making “speed bumps.” For example, people can create a three-day wait rule that says they can’t act on a decision for three days, or a rule that they can’ t act on any decision until a loved one or spouse signs off on it first.

Other tips include setting trading rules that never change, and working with a fee-only advisor to formulate a written investment policy statement to prevent irrational decision-making during times of economic stress or euphoria. It also suggests ignoring the daily news, if possible, and ignoring irrelevant information, particularly short-term price movements.

“Knowing about biases—especially your own—is a great step to learning how to avoid them in our daily life,” said the report. “However, that may not always be enough. Biases are a complex concept to wrap our heads around, and unless we know what they mean for our finances, we may underestimate their impact.”

Key Takeaways:

  • The majority of Americans show biases of present bias, loss aversion, overconfidence, and base rate neglect.
  • Higher bias levels directly correlate with worse financial outcomes and detrimental financial behaviors: from failing to plan ahead to failing to save and invest.
  • Techniques are available to help combat biases and their negative effects on financial health and wealth.

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‘Pay Attention to Behavioral Investment Strategy’, Investors Told

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