First Pooled LDI Pension Buyout Completes

The first risk-transfer transaction by a pension in a pooled liability-driven investment (LDI) vehicle has been carried out by a UK fund.

The Western United Group Pension Scheme has transferred £280 million of its assets and liabilities to Rothesay Life, adding to the £220 million already taken on by the specialist insurer in two previous transactions. The latest transaction took the form of a bulk annuity and the fund is now expected to wind up.

Immediately before this final deal was transacted, the pension had held its assets in an LDI transition fund run by F&C Investments. “This allowed the scheme to transition out of their pooled LDI holding whilst mitigating out of market risk and saving hundreds of thousands of pounds in transaction costs,” the asset manager said.

Additionally, the transition fund allowed the pension to deliver a pre-specified portfolio of bonds to the insurer, which was beneficial to the price stability of the buy-out.

For more stories like this, sign up for the CIO Alert newsletter. 

Alex Soulsby, head of LDI at F&C Investments, said: “Transitions of this nature have ordinarily been the preserve of large segregated portfolios. The transition LDI fund allows pooled LDI clients to achieve the same benefits, overcoming one of the more significant hurdles to investing in LDI in the first place.”

The deal takes the total of assets and liabilities transferred this year towards record levels. Last month, consultants LCP said 2014 could see £10 billion de-risked by pensions, while Rothesay Life Managing Director Tom Pearce said his firm, which has carried out six of the 10 largest deals in the UK, continued “to see growing demand for full buyouts from corporates.”

The Swiss-based CERN Pension Fund is officially on the hunt for new CEO to replace Theodore Economou, who will leave at the end of his term next year.

An advertisement posted online says the CEO will “lead a management team that will include a chief investment officer and a head of benefits”. Economou took on the role of CIO in 2012 following the departure of Gregoire Haenni, but the CHF4 billion ($4.4 billion) pension is set to split the CEO and CIO roles again.

The successful candidate will require a master’s degree in finance, economics, or “equivalent fields”, and will serve an initial term of three years. The appointment and subsequent reappointments will be decided by CERN’s council.

The new CEO can expect a salary of between roughly £127,000 and £150,000 a year, according to the job advert. The closing date for applications is September 20, and candidates should apply directly to CERN.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

During his six-year spell at the helm of the CERN pension, Economou and his team have restructured the fund, replacing its return-based approach with a risk-based one. Following his departure he will seek to distribute this “CERN Model” to institutional investors more widely.

The CERN pension won CIO’s Industry Innovation Award in 2012 for the “Best Public Pension Plan – Below $15 Billion”.