Asset AllocationSeptember 6, 2023

BAE Systems Outsources Management of 2 UK Pension Funds to Goldman Sachs

At 23 billion pounds, the OCIO mandate is the largest in UK history, according to the asset manager.

Reported by Michael Katz

The trustees of two U.K. defined benefit pension funds sponsored by aerospace giant BAE Systems plc have outsourced the management of approximately 23 billion pounds ($28.76 billion) in assets to Goldman Sachs Asset Management.

According to the asset manager, the mandate is the largest outsourced CIO appointment made in the U.K.

According to BAE Systems, its in-house investment management team will join Goldman Sachs Asset Management while continuing to provide investment services to the BAE Systems Pension Scheme and BAE Systems Executive Pension Scheme. The management of the assets, as well as the asset management team, is expected to transition to Goldman Sachs toward the end of this year.

“The pension funding level has moved from a significant deficit to a surplus,” BAE Systems Group Finance Director Brad Greve said in a release. “As we continue to look at ways to further de-risk pension liabilities, reducing the cost and improving the efficiency of asset management are essential.”

Greve added that “this move doesn’t limit BAE Systems’ flexibility in exploring further ways of reducing our pension risk and we’ll continue to be dynamic in managing this risk going forward.”

BAE Systems expects the agreement to deliver performance and cost benefits for the two pension funds due to greater scale and efficiency under Goldman Sachs, which supervises more than $2.7 trillion in assets. BAE Systems also stated that the decision to tap Goldman Sachs as its OCIO followed a “highly competitive” tender process.

Goldman Sachs Asset Management claims to be the second largest OCIO manager in the world, with more than 200 billion pounds in assets under supervision. According to the firm, the mandate also adds to the approximately 175 billion pounds it manages in liability-driven investing and cashflow-driven investing portfolios.

In recent years, other large U.K. employers outsourced their pension investing. Early in 2023, the Royal Mail Pension Plan outsourced nearly 11 billion pounds in pension assets to BlackRock. Last year, energy services company Centrica’s pension funds transferred 10 billion pounds in assets to Schroders, while in 2021, British Airways transferred 21 billion pounds in assets from two pension funds, also to BlackRock.