UK Pensions Lifeboat Boosts Agri-Alternatives

(February 6, 2012) — The organisation offering a lifeline to bankrupt companies’ pension funds in the United Kingdom has chosen timberland and agricultural investments in its latest venture into alternative assets.

The Pension Protection Fund has issued a tender for managers specialising in these alternative investments to join a panel that will uncover opportunities for investment, it said today.

The fund, worth around £9 billion, is expected to grow larger as more bankrupt companies’ funds are absorbed into it rather than face underfunding and loss of benefit payments to members.

Diversification into this type of alternative asset follows a move last month by the PPF to search for managers of sophisticated types of fixed-income, including asset-backed securities.

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A spokesman from the PPF said: “The evolution of the PPF’s investment strategy and the growth of its assets allow access to a wider range of investment opportunities. Investment in farmland and timberland complements our alternatives portfolio and brings diversification benefits, thereby reducing overall risk. Returns will be underpinned by global population growth and other long-term secular trends. Land resources, on the other hand, are under pressure.”

The investment will be predominantly in land and the operations necessary to cultivate and market agricultural produce, or to grow and sell timber, according to the PPF. Returns are to be gained through a mix of capital appreciation and yield.

Last month, a study from Mercer showed more than half of all pension scheme investors considered climate change when making asset allocation decisions. The investment consulting firm found that one-third of project participants had begun to or planned to allocate more to “climate sensitive assets” including agricultural land and timberland.

At the end of March 2011, the PPF had a strategic 20% allocation to alternative assets, including real estate. This was double the assets it had earmarked for public equities. The remaining 70% was meant to be held in cash and bonds, much of which was due to its liability-driven investment portfolio.

However in reality at that time, the fund’s actual allocation was skewed to have under 12% held in alternatives, but almost 15% in public equity. These figures were still within the tolerance set by the PPF board.

The PPF said: “The proportion of the alternatives allocation to farmland and timberland will vary over time and depend on the opportunities available in future.”

(February 6, 2012) — Food giant Nestlé has appointed Schroders to co-run an investment vehicle with its in-house asset manager, a year after bringing much of its fund activities in-house.

Robusta Asset Management has appointed the largest listed investment manager in the United Kingdom to co-manage its emerging markets fund, according to an announcement on the Irish Stock Exchange.

Robusta Asset Management is an Ireland-incorporated fund management company wholly-owned by Nestlé and is employed to invest the parent’s pension scheme money and other cash pools.

The announcement to the exchange at the end of last week said Schroders had been appointed to co-run an emerging market equity fund, and had taken control of assets at the end of January.

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Schroders declined to comment on the appointment.

Nestlé Capital Management, the York-based in-house manager of company assets, took over control of the Robusta funds in 2007 and by December 2010 had £7.1 billion under its auspices, according to the most recently available annual report. The company manages money for the company outside of its pension scheme, the assets of which are held on a pooled basis and amounted to CHF19.8 billion, or £13.6 billion, at the end of December 2010. At that time, the company’s aggregate pension deficit sat at CHF1.5 billion.

The launch of NCM sat alongside Nestlé’s decision to bring much of its asset management in-house. In 2008, JP Morgan Asset Management and Mellon Global Investors were axed from the external roster.

In 2010, NCM moved on with a plan to internalise the hedge fund of fund functions for up to 50% of the Nestlé Pension Fund assets, according to the manager’s annual report of the same year.

During the same time, a multi-strategy fund of hedge funds and a second private equity fund of funds were launched by Robusta Asset Management, according to its annual report.

At the end of December 2010, Robusta Asset Management was responsible for CHF9.3 billion. Schroders managed £182 billion at the end of September 2011.

Nestlé had not returned requests for comment at the time of going to press.