Record Investment Earnings – and Government Contributions – for US Public Pensions

(June 29, 2012) — Public sector pension plans in the United States scored their largest investment returns in almost three decades over the first quarter of the year, as the government also ploughed in record levels of contributions, data have shown.

The largest 100 public-employee retirement systems saw aggregate earnings on investments reach $179.2 billion in the first three months of the year, the United States Census Bureau announced yesterday. This is the largest recorded gain since the third quarter of 1974 when the bureau began collecting data.

Collectively, assets rose by 5.6%, from $2.6 trillion to $2.8 trillion at the end of March, bringing them to the second highest figure since the downturn in 2008, the bureau said.

Alongside these gains, government contributions also reached record levels in the first quarter of the year.

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The report said: “There was a quarter-to-quarter increase of 12.7%, from $21.5 billion to $24.2 billion in the first quarter of 2012 and a year-to-year increase of 14.5% from $21.1 billion in the first quarter of 2011.”

However, employee contributions quarter-to quarter also increased, but to a lesser extent. They rose 1.5%, from $9.2 billion to $9.3 billion in the first quarter of 2012 and there was a year-to-year increase of 7.9% from $8.6 billion in the first quarter of 2011.

In terms of allocation, these large investors have been increasing their exposure to assets based outside their home jurisdiction. The report showed holdings of international securities had risen to the highest level since the census began recording this type of data in 2000.

The report said: “There was a quarter-to-quarter increase of 16.3%, from $472.8 billion to $550.0 billion in the first quarter of 2012. International securities year-to-year increased 7.4% from $512.3 billion in the first quarter 2011. International securities comprised almost a fifth (19.9%) of the total cash and security holdings of major public pension systems for the current quarter.”

The bureau said it had reclassified some assets to better show their characteristics. This meant federally-sponsored agency securities are now classified under federal government securities instead of corporate bonds. Private equity, venture capital, and leveraged buy-outs are now classified under corporate stocks instead of other securities.

These changes had no impact on the measurement of international securities, the bureau said.

One of the largest Eurozone banks has brought a pension specialist on board as it waits out the region’s crisis before taking its UK arm public, aiCIO has learnt.

(June 29, 2012) – Spanish bank Santander has appointed a retirement benefits specialist to advise its pension fund arrangements ahead of the United Kingdom-based arm listing on public markets, aiCIO has learnt.

Antony Barker will join the UK arm of the Spanish bank later this summer to advise on around £8 billion in pension assets, a source close to the move told aiCIO.

Barker is in the process of leaving investment consultant and fiduciary specialist JLT Pension Capital Strategies where he has been a director since 2009. The firm confirmed Barker’s imminent departure. He joined JLT from BNP Paribas, where he had been global head of pension advisory.

In the new role, Barker will be in charge of looking after Santander’s UK pension assets and liabilities. In the main defined benefit fund these both totalled just over £7 billion at the end of 2011 on an accounting basis, according to the company’s annual report, meaning it was almost 100% funded. The group also runs significant defined contribution programmes.

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The move follows a spate of large companies bringing specialist pension knowledge in-house. Last week, aiCIOrevealed insurer Aviva had appointed the current CIO of the Pension Protection Fund – the UK’s lifeboat for bankrupt company schemes – to look after its £10 billion pension.

Santander is one of the largest banking groups in the Eurozone and has plans to list its UK arm on the London Stock Exchange. However, these plans have been pushed back due to the on-going crisis in the Eurozone and the IPO is now believed to be scheduled for 2014.

The Santander Group has made a number of acquisitions over the past decade, including building societies Abbey National, Alliance & Leicester and Bradford & Bingley. This has often entailed taking on their retirement arrangements.

Barker’s role could also entail integrating the pension funds and retirement arrangements of any further acquisitions the UK bank may make, working closely with the Spanish parent group.

Santander had not returned with comment by the time of going to press.