UK Pension Funding Level Rises 2% in April to 95.1%

The funding level of the 5,588 corporate UK pensions plans in the Pension Protection Fund’s (PPF) 7800 Index rose to 95.1% at the end of April from 93.1% at the end March, as the aggregate deficit decreased during the month to £81.7 billion ($110.67 billion) from £115.6 billion.

Compared to April 2017, the funding level increased 5.6% from 89.5%, while the aggregate deficit more than halved from £179.8 billion.

Within the index, aggregate pension assets totaled £1.58 trillion at the end of April, which was a 0.7% increase from the previous month, and a 2.6% rise compared to the year-ago month. Meanwhile, total liabilities were £1.66 trillion at the end of April, a decline of 1.3% for the month, and 3.4% from the same time last year.

Aggregate liabilities of the pension in the index decreased 1.3% during the month to £1.66 trillion from £1.68 trillion at the end of March, and fell 3.5% over a year from £1.72 trillion at the end of April 2017.

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Out of the 5,588 pension plans covered by the index, 3,637, or 65.1%, were in deficit at the end of April, compared to 3,796 plans in deficit at the end of March, or 67.9%; and 4,055 at the end of April 2017, which accounted for 72.6% of all plans. At the same time, the number of plans in surplus rose to 1,951, or 34.9% of all plans at the end of April, from 1,792, or 32.1%, at the end of March, and 1,533 in surplus, or 27.4%, at the end of April 2017.

Among the pension plans that were in deficit at the end of April, the aggregate deficit decreased to £194.9 billion from £217.6 billion at the end of March, and from £259.6 billion at the end of April 2017. Meanwhile, the total surplus of pension plans in surplus increased to £113.2 billion from £101.9 billion at the end of March, and £79.8 billion at the end of April 2017.

According to the PPF, conventional 15-year gilt yields increased 10 basis points, while index-linked 5-15 gilt yields rose by 2 basis points over the month. Assets increased by 0.7% in April, which was the result of higher equity prices, but offset by a decrease in bond prices. Over the previous 12 months, conventional 15-year gilt yields were up 19 basis points, index-linked 5-15 year gilt yields were up by 44 basis points, and the FTSE All-Share Index gained 4.2%. Equity markets and gilt yields are the main drivers of funding levels.

Tags: Funded Status, Pension, Pension Protection Fund, UK

The California Public Employees’ Retirement System (CalPERS) will be looking for its third chief investment officer (CIO) in less than 10 years with the announcement Monday that Ted Eliopoulos will be stepping down due to family reasons.

Eliopoulos, who became CIO in September 2014, served less than four years before announcing his departure at the May 14 CalPERS Investment Committee meeting.

The departure comes at a crucial time for CalPERS, the largest public retirement plan in the US with almost $350 billion in assets under management.

The Sacramento-based pension plan is only 64% funded and is in the midst of a three-year plan to lower its expected rate of return to 7% from 7.5% because of diminished expected future returns. In turn, municipalities, school districts, and the state government are all paying higher costs per employee to account for the lower rate of return.

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Eliopoulos said at the meeting Monday that he is leaving CalPERS because he will be moving to New York.

“With two daughters in college, and one with health considerations that require my wife and me to be within reasonable distance, we have decided to relocate to New York City where they both will be in school,” said Eliopoulos. “Due to this fact, I will be stepping away from CalPERS by the beginning of 2019.”

Eliopoulos declined a request for an interview.

The CIO replaced Joseph Dear, first in an acting capability in early 2014. The word acting was removed from his title in September 2014, after the CalPERS board named him as the new CIO. Dear had died in February 2014 of prostate cancer after serving almost five years as CalPERS CIO.

CalPERS spokesman Megan White said a search for a replacement for Eliopoulos will begin immediately. In deciding who should fill Eliopoulos’ shoes, the CalPERS board will have to ponder whether it wants to continue its recent tradition of hiring CIOs with management and political connections rather than extensive portfolio management experience.

The issue of which direction to go was the topic of heated discussions before the CalPERS board meeting in closed session back in 2014, sources say. The debate went this way:

On one hand, who to best lead CalPERS but a top investment expert? But on the other hand, political and management savvy is necessary to oversee an investment staff of 400 and deal with members of the California legislature, who interfere with the operations of the retirement plan, by introducing bills, for example, that require divesture of certain investments.

Eliopoulos was a protégée of former California Treasurer Phil Angelides. He served as deputy treasurer and then chief deputy treasurer in appointed positions before being named to direct the CalPERS real estate program in 2007.

Both Angelides and Eliopoulos served at different times as president of AKT Development, a firm controlled by Sacramento real estate developer Angelo Tsakopoulos, a major political fundraiser who has given millions of dollars to California Democratic candidates, show state and federal records. He helped fund Angelides’ unsuccessful campaign to unseat Arnold Schwarzenegger in 2006.

Dear served as the politically savvy chief of staff to Washington Gov. Gary Locke, then later as executive director of the Washington State Investment Board, before joining CalPERS in 2009.

Eliopoulos moved quickly to make his mark on CalPERS upon his initial appointment. Shortly after he took over the CIO’s role in an acting capability, he began a review of CalPERS’s $4 billion-plus hedge fund portfolio, which had been championed by Dear.

Just a week after being named permanent CIO in September 2014, he announced that CalPERS was getting out of hedge funds because of high fees and the difficulties of scaling the program to make a significant investment gain in CalPERS’s large portfolio.

The fallout from the end of the program also saw the departure of CalPERS’s top hedge fund officials.

CalPERS is now in the midst of another review of its $26 billion private equity program initiated by Eliopoulos. Investment staff is examining whether to outsource the program to an external manager or start a direct investment program, cutting out limited partners as Canadian retirement plans often do.

Tags: CalPERS, CIO Search, Pension, Ted Eliopoulos