L&G Seals Buy-In for International Pension Fund

Legal & General (L&G) has insured £129 million of liabilities for Unilever’s Uniac Pension Fund for overseas workers.

The Uniac fund was established as a “Section 615” plan to cater for UK-based employees of the consumer goods giant who had been seconded overseas. The buy-in deal is the largest such de-risking transaction to date for a Section 615 pension, L&G said.

Lyn Williams, chairman of trustees of the Uniac Pension Fund, said the buy-in was a “central part of our strategy to simplify the scheme and align a significant portion of our assets and liabilities”.

Clive Wellsteed, partner at LCP and lead adviser on the transaction, added: “Section 615 pension plans operate under different governing legislation to most defined benefit schemes and have some additional features, including the ability for new dependents to fully commute their pension for cash.

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“This innovative buy-in provides comprehensive coverage of these features and offers excellent value for money to Unilever and the trustees.”

Meanwhile, Rothesay Life has boasted of a “pipeline… predominantly full of buy-outs” after insuring the 600-member Panasonic Pension Scheme.

Managing Director Tom Pearce said Rothesay Life had seen “high profile corporate interest” in full pension fund buyouts, adding that “as the market conditions remain favourable we expect sponsor interest to continue”.

Neither Panasonic nor Rothesay Life revealed details of the transaction, but the insurer said it had established a “deferred premium structure” to offer Panasonic “certainty that no surplus would be trapped”.

Europe has seen a number landmark de-risking deals this year, most notably BT’s record-breaking longevity swap transaction with the Prudential Insurance Company of America.

In the Netherlands, Aegon insured 28,000 members of two miners’ pension funds, AMF and BFM, in one of the country’s biggest ever buyout transactions.

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Fee negotiations are hard. Term negotiations are hard. Separate account naming decisions should not be. If the California Public Employees’ Retirement System (CalPERS) records are any indication, they are much more creative—but they can also be just as problematic.

“The Asian funds-of-hedge-funds program, launched in 2005/2006, was called ‘Blue Diamond,’” one CalPERS insider recently told me, reminiscing over how the Californian giant had named its first hedge fund separate accounts. I had been digging through the fund’s financial statements in reaction to its momentous (to some) decision to abandon its Absolute Return Strategies portfolio, and was attempting to determine which hedge funds would be the biggest losers. The names I found buried within their 2013 “CIO Performance Report” were slightly odd. Ermitage Highbury? PAAMCO 1848? OZ Eureka? I had never heard of them.

There was a reason: They were all, as the insider pointed out, bespoke names with quirky references. “‘Blue Diamond’ is a play on the CalPERS logo, which is a blue triangle but has a starbust-y thing that could be seen as light going through a diamond,” he explained. (Another California public fund CIO claimed that his fund “spent literally two hours arguing over what to name a separate account. It’s funny—but that’s two hours we’ll never get back.”)

“European funds-of-hedge-funds, launched in 2006, were called ‘Highbury,’” he continued. “Somebody on the CalPERS team was a huge Arsenal fan. Emerging manager funds-of-hedge-funds, launched 2006/2007, were labeled ‘1848.’ That was the year gold was discovered in California.” Finally, “Eureka”: “Customized, direct hedge funds or funds-of-one, launched 2009, were ‘Eureka.’ That’s the California state motto.” In Greek, it means “I’ve found it.” It is also the name of the coastal city into which men and resources rushed to support California’s literal gold diggers.

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Being gold rush references, “Eureka” and “1848” are double-edged swords for the politically sensitive pension plan—was it CalPERS, or hedge funds, that reaped California’s gold?