Breaking News: Tata Steel Signs RAA to Detach Pension

Tata Steel UK has signed a regulated apportionment arrangement (RAA) with the trustee of the £15 billion ($19.5 billion) British Steel Pension Scheme (BSPS) that will separate the pension from Tata Steel UK, in exchange for of £550 million and 33% stake in the company.

“Considering the continued challenges in the global steel industry as well as the uncertain global politico-economic environment, the RAA presents the best possible structural outcome for the members of the British Steel Pension Scheme and for the Tata Steel UK business,” said Koushik Chatterjee, Tata Steel’s group executive director.

The Pensions Regulator (TPR) has given its initial approval to the deal, and issued a determination notice and a clearance statement in response to Tata Steel’s application for clearance and approval in respect of the RAA. This kicks off a 28-day period, during which directly affected parties by the RAA may refer the decision to approve the RAA before a tribunal of the UK court system.

At the end of the 28-day period, and in the absence of any referrals, it is expected that TPR will confirm its approval of the RAA, which would take effect after Tata Steel UK makes the £550 million payment to the BSPS, and issues shares in Tata Steel UK, which would lead to a 33% economic equity stake in Tata Steel UK being held by the Trustee.

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“We do not agree to these types of arrangements lightly but after several months of robust negotiations in this case, we believe that it is the best possible outcome for everyone involved in what is a very difficult situation,” said Lesley Titcomb, chief executive of TPR.

“We have worked closely with the scheme trustees and the Pension Protection Fund to maximize the value received by the scheme.

Tata Steel UK said it has also reached an agreement for the sponsorship of a proposed new pension plan. Sponsorship of the plan is conditional on certain qualifying conditions being met. All members of the BSPS would be invited to transfer to the new scheme subsequent to the completion of the RAA. If the qualifying conditions are met, members will be able to transfer to the new plan.

Tata said the new pension will have lower future annual increases for retirees and deferred members than the BSPS, giving it an improved funding position “which would pose significantly less risk for Tata Steel UK.”

Tags: British Steel Pension, Tata Steel, UK

Oxford University’s £2.34 billion Oxford Endowment Fund returned 16.4% for the fiscal year ending Dec. 31, 2016, according to its annual report.

The fund also reported 11% annualized returns over a three-year period, 11.8% annualized returns over a five-year period, and 10.1% annualized returns since the fund’s inception in 2009. The fund’s cumulative return since inception is 116.7%.

“We are pleased to report that we have exceeded our investment objective of generating a 5% real return for our investors,” said the report.

Private equity was the fund’s best-performing asset class, with three- and five-year annualized returns of 23.7% and 20.5%, respectively, with an annualized return of 15.1% since its inception.

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“In the last three years, private equity has begun to make a significant impact,” said the report. “It takes several years to build meaningful investments in private equity, and the care taken in selecting strategies and managers has paid off.”

The public equity asset class has returned three- and five-year annualized returns of 11.7% and 13.9%, respectively, while returning an annualized return of 9.1% since inception. The endowment fund also touted the benefits of active management during a year when many pension funds vowed to reduce or eliminate actively managed investments due to the high fees.

“Our strongest-performing public equity manager has an annualized five-year return of 21.4%,” said the report, “proving, if done well, active management adds considerable value to the Fund.”

The fund’s credit asset class has produced three-year annualized net returns to Dec. 31, 2016, of 15.8%, five years of annualized returns of 14%, and 12.4% in annualized returns since the fund’s inception. And the property asset class had three-year annualized returns of 9.1%, five-year annualized returns of 9.2%, and an annualized return of 9.1% since inception.

“While we invest for the long term, over the course of 2016 we were frequently reminded of the need to manage macroeconomic and political risks,” said the report. “Our approach to risk management is not to spend significant amounts of time forecasting precise outcomes of inherently unstable events, but to ensure that the Fund has the appropriate balance of opportunities and protections in a range of developments.”

The report said that the most significant risk for UK investors in 2016 was the EU referendum vote. “We spent time understanding the potential impact of this specific binary event, and planned clear practical outcomes for either result,” said the report.

“Further to our analysis, we came to the conclusion that in the event of an ‘out’ vote, Sterling would be the release valve and hence moved our currency exposure to the lower end of its permitted Sterling range,” said the report. “We moved quickly to add capital to public markets which fell significantly, using our position as long-term investors to take advantage of a market overwhelmed by short-term fear.”

Tags: Endowments, Fiscal Year, Oxford University

Oxford University Endowment Returns 16.4% for 2016