UK Industry Group to Advise on GMP Equalization

The UK’s Pensions Administration Standards Association (PASA) is forming a new industry group to help pension plans abide by the High Court’s landmark ruling on the equalization of guaranteed minimum pensions (GMPs).

In October, the UK’s High Court ruled that Lloyds Banking Group’s pension plans must equalize GMPs for men and women. The court said pensions provided to members who had contracted out of their plan must be recalculated to ensure payments reflect the equalization of normal retirement ages in the 1990s. Experts estimated that the ruling could cost providers £10 billion ($12.9 billion) to £20 billion in payouts.

The ruling also means that thousands of defined benefit pension plans will have to amend their rules and equalize GMPs between men and women. However, the court did not establish a method for equalization, and said that multiple methods are available.

“We recognize the value that best practice guidance on GMP equalization will provide,” said Geraldine Brassett, a PASA board member who will chair the new group. “GMP equalization projects are likely to be complex, so it is important that advisers, administrators, trustees, and employers work collaboratively to ensure cost-effective delivery and clarity for scheme members impacted.”

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The group will be made up of representatives from across the industry, including from the May administration, as well as from the legal, advisory, actuarial, data, and trustee sectors. It is tasked with developing and promoting best practices on issues arising from the ruling, including how to address missing data, and how to deal with transfer requests and rectifying underpayments.

PASA was formed in 2011 as a not-for-profit organization to promote and improve the quality of pension administration services for UK pension plans.

“Delivering GMP equalization will be challenging and we welcome this initiative to bring clarity to the market,” David Fairs, The Pension Regulator’s executive director of regulatory policy, said in a release. “It will take some time to work through all the issues. Establishing best practice will help [the] industry do this as efficiently as possible, and minimize disruption to routine scheme business.”

Tags: Guaranteed Minimum Pensions, Pensions Administration Standards Association, UK

Forget those equity-based hedge funds. Jana Partners is ditching two equity funds and doubling down on activist investing.

The firm characterizes the new strategy in a dry way as it describes its goal of shaking up managements in firms where it invests. “We will transform into a firm solely dedicated to our core competency of shareholder engagement,” said Barry Rosenstein, Jana’s founder, in a letter to investors.

The establishment will shut down the Jana Partners and Jana Nirvana funds, and is keeping its $1.5 billion Jana Strategic Investing fund, which specializes in activism. It will also launch a social activist fund, called Jana Impact Capital, to be managed by Charles Penner and Daniel Hanson.

The firm has chosen to pursue activist investing harder because it says these areas perform better than their newly liquidated funds.

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“This is where we have delivered our best returns for investors, developed a real competitive advantage, made our mark on numerous industries,” said Rosenstein’s letter.

Since the firm’s inception in 2001, it regularly posted double-digit returns that surpassed the market. Then came the 2008 financial crisis. Jana’s regular hedge funds have underperformed in recent years. The Jana Partners fund fell nearly twice as hard as the market in 2018, although the industry as a whole lost around 4%, according to HFR. Stock-picking funds overall, such as Jana Partners, fell about 7% in 2018.

The activist strategy, however, is a different story for Jana.

Since its 2010 launch, the Jana Strategic Investing fund has returned an average of 15% each year. One of the edges this portfolio has is its non-traditional model. Rather than function like a typical “2 and 20” hedge fund, the activist fund operates like a private equity vehicle, a testament to Rosenstein’s roots in the space.

Jana regularly collaborates with institutional investors to help meet its environmental, social, and governance (ESG) goals with companies it takes a stake in. Last year, the firm teamed with the $214.9 billion California State Teachers Retirement System (CalSTRS) against Apple to push the tech titan into developing ways to help battle smartphone addictions in children.

Other notable ESG practices from Jana include its Whole Foods criticisms leading to the grocer’s Amazon sale and calling on chip manufacturer Qualcomm to slash costs and use the proceeds to reform its compensation structure.

Jana Partners could not be reached for comment.

Tags: Activist Hedge Funds, ESG, Hedge Funds, Jana Partners LLC