(May 3, 2012) — Straight talkers are not a rare breed in finance, but few will give it to you as straight as Chris Parrott, Pensions Manager at European airport owner BAA.
“There is a lot of ‘ego buying’,” he tells me over a beer last week. “Trustees and pensions boards have been buying into things they don’t understand because it might have made them look good.”
You get the feeling this is something Parrott could not be accused of doing.
“For example, look at swaps – would you agree to something like that having just learnt about them over a coffee? They are complicated and take a couple of sessions to work out before anyone should agree to anything.
“Trustees should be able to explain what they’ve done and answer honestly whether they would have taken the same decision if they had been doing it with their own money.”
Parrott took over the BAA pension funds – defined benefit and contribution – in November 2010 after years creating and managing benefit systems in the United Kingdom retail sector. Pensions are all he’s ever done – and it shows.
Not only does Parrott know pretty much everyone in the London pensions ‘scene’, his honesty is disarming in an industry where ‘sales and marketing’ are king.
“Where do I stand on the fiduciary management/outsourced investment debate? I don’t really care who fills the role, as long as it’s someone who is well-placed to do it. Trustees and pensions managers don’t have time to monitor every move – they have to take advantage of someone doing it for them.”
OK then.
Having started out in the UK government’s Foreign and Commonwealth Office as an Administration Officer straight out of school in 1982, he – as many do – fell into pensions by accident.
He was put on telephone duty on the desk that dealt with the pensions of all staff employed by the government department – from the lowliest clerk to highest ambassadors around the world.
He was – as, again, many are – hooked.
From Whitehall he moved to the Western United Investment Company, the largest merchant navy service outside the British armed forces, and ran its pension department before moving to retail giant Sears, then onto electrical store chain Comet.
“It was a great job and the best boss I’ve ever had,” he says. Ian Edwards, Chairman of the Pension Board, was the boss in question. It was also at Comet that he worked alongside another well-known figure in UK pensions Colin Hately, now Group Pensions Director at Associated British Foods.
The tenure was short-lived, however. He set up a defined benefit fund for the company that launched in 2003, only for it to close in 2007.
“It was the right thing to do. The employer couldn’t afford it as they run a low margin business. You have to be honest and if you can’t afford it say so.”
Honesty is something Parrott holds dear. In the years that I have known him he has never been anything less than 100% clear. If he doesn’t have an opinion on something, he won’t make one up for the sake of it, where others would. Some initially mistake this for rudeness (myself included) but it is just a ‘no-messing’ approach and you realise that pretty quickly. If he is permitted to tell you something, he will tell you; if he cannot, he won’t.
And there has been plenty of opportunity for indiscretion. In October 2008 – the aftermath of the Icelandic crash – Parrott started working for House of Fraser – a department store owned by Icelandic investment firm Baugur. The company put its UK arm into administration less than six months later and the store clung on to lifesavers.
Throughout the process Parrott kept quiet – at least to the press and wider industry – about what was going on in any detail, preferring to simply acknowledge it was a challenge, but what in the financial sector wasn’t in late 2008?
Now he talks a little more freely. “It was the toughest working environment I’ve ever been in. We were backed by an insolvent private equity company – what a nightmare.”
Still no details, but a large gulp of beer as he remembers the two years there says more than enough.
The next and most recent role has been no cakewalk either. In late 2008, BAA, which operates airports all over Europe, was told by the UK’s Competition Commission to sell off several of its holdings. The disposal of Gatwick, London’s second airport, meant a £212 million windfall for the defined benefit pension fund. This helped the £2.7 billion fund – which was in surplus at the end of 2011 only to be hit by charges and ‘market conditions’ three months later – but did nothing for the strength of the employer covenant.
With the growth of air travel, however, there is little concern of insolvency here.
“It’s fantastic,” Parrott says. “We have a funding agreement in place after the Regulatory Price Review [which forced the sale of Gatwick and subsequent £212 million] and we can just get on with it.”
And that’s what he’s doing. A couple of years ago when heavy snow closed Heathrow causing chaos for thousands of travellers and drawing criticism of BAA’s preparation, Parrott was on the front line.
“I’ve been out in the terminal helping passengers,” he told me after I emailed to see what on earth was going on.
“I’ve been telling them what’s happening – keeping them updated.”
You can bet the ones who were directed by him were the best informed in the airport that day.