Whisky to Plug Pension Deficit

Diageo has found a creative way to plug its growing UK pension hole: Fill it with £430 million ($642 million) worth of Scotch from its distilleries in Scotland.

(July 2, 2010) — Drinks giant Diageo PLC, London, has revealed a plan to plug its £862 million UK pension fund deficit with millions of pounds worth of maturing Scotch whisky. Under an agreement with its UK pension trustee, Diageo said it will transfer its maturing whisky stock, which has a book value of £500 million, into a new pension funding partnership (PFP).

“A pension funding partnership will be formed, which will hold maturing whiskey spirit as assets,” Diageo, which also makes Guinness stout and Smirnoff vodka, said in a statement.

The sale price is expected to cover the remaining funding gap, with the whisky barrels generating an income for the fund of £25 million a year over 15 years, at which point the barrels can be sold back to Diageo. The barrels can be sold back to Diageo for as much as £430 million, depending on the size of the remaining deficit.

As the whisky reaches maturity, Diageo will pay a fee to the £4.6 billion fund to replace the mature spirits with a younger batch.

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Diageo, whose products include Guinness, Johnnie Walker and Baileys, is not alone in its effort to buoy growing pension deficits in the UK, which increase as people live longer, with so-called contingent assets while avoiding a hit on company balance sheets. Sainsbury, Marks & Spencer and Whitbread have used property assets to fill holes in their pension schemes. Additionally, the investment firm Man Group moved some hedge fund assets into a trust as a security for its British pension plan in March.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Norway's SWF Expands Investments in Asia

The fund is following a trend among sovereign wealth investors boosting investments in the Asia-Pacific region.

(July 1, 2010) — Norway’s sovereign wealth fund, the world’s second largest, plans to boost investments in Asia to take advantage of the region’s strong economic growth.

The fund follows the lead of other sovereign wealth investors including Temasek Holdings Pte and the Qatar Investment Authority that have also upped their investments in the region.

Norges Bank Governor Svein Gjedrem, who was in Singapore as part of yesterday’s opening of the SWF’s second Asian office, said the fund is currently underweight in Asia. The SWF’s new Singapore office will be responsible for portfolio management and securities trading and will help NBIM’s existing office in Shanghai to cover the increasingly important Asia region, the fund stated in a release. Currently, the fund has about $1.1 billion invested in Singapore.

“An office in Singapore will strengthen our operations in Asia,” commented Gjedrem. “Having a presence in a region with strong economic growth is important for achieving good management results.”

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Sigmund Kyrdalen, a senior portfolio manager at NBIM who managed its London office for two years, has been appointed general manager in Singapore.

Norway invests the country’s oil and gas revenue abroad in a fund called the Government Pension Fund Global, which had a market value of almost 2.8 trillion Norwegian crowns at the end of June. Around 10% of the fund is invested in Asia, and around 15% of its equity investments are in Asian companies.

In addition to Singapore, NBIM has offices in Oslo, London, New York and Shanghai.



To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

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