National Grid UK Pension Scheme and Legal & General Investment Management agree Strategic Partnership for £13 billion pension mandate
- Legal & General Investment Management (LGIM) to manage £13 billion of assets for the National Grid UK Pension Scheme (the Scheme),
- Aerion Fund Management (Aerion), the in-house manager of the Scheme, to be acquired by LGIM, and
- An Executive Office is being created by the Scheme to determine strategic asset allocation and provide oversight of external managers.
The Board of Trustees of the National Grid UK Pension Scheme (the Scheme) and Legal & General Investment Management (LGIM) are pleased to announce that they have agreed a long-term strategic partnership for the management of £13 billion1 of the Scheme assets currently managed by Aerion Fund Management (Aerion). Going forward, LGIM will manage mandates for the Scheme in fixed income, LDI and equity asset classes. As part of the partnership arrangement, LGIM will acquire 100% of the share capital of Aerion.
The transaction is expected to complete before the end of the year, and is subject to regulatory approval.
Nigel Stapleton, Chairman of the Scheme Trustee Board, said "Aerion has served our Scheme well over many years. Moving away from in house asset management has been a difficult strategic decision for the Trustees. However, the increasing maturity of the Scheme and evolution to our investment strategy meant it was a carefully considered decision that we could not avoid making. Now we look forward to a long and successful strategic relationship with LGIM. In terms of its culture, key competencies and the commercial terms offered to us, the Trustees believe that LGIM can serve our future needs extremely well. These new investment governance arrangements do, therefore, provide an effective and robust model, operating in the best interests for our members"
Mark Zinkula, CEO of LGIM, said "I am delighted that we have entered into a long-term strategic partnership with the National Grid UK Pension Scheme. We are looking forward to working with the Trustees and their Executive Office on delivering their key objectives. LGIM is well positioned to manage the many different investment strategies, not only for the Scheme's needs today, but also as the Scheme's asset management requirements change over time."
The Transaction is in line with the Scheme's objective, as announced on 28th May 2015, to procure the best possible outcome for all Scheme members. The Transaction will enhance the risk-return profile of Scheme assets and minimise the operational risks involved in transitioning to a significantly different investment governance structure. The Trustees will have the flexibility to withdraw assets from the core portfolio (primarily to fund benefit payments and to invest in specific active equity strategies) and also to transfer in assets from portfolios which are currently held by other third party managers. Transfers in would be on the same terms as applies to the core portfolio while transfers out would be permitted under certain circumstances and subject to satisfying a minimum fee requirement that the Scheme is making to LGIM.
In parallel with the LGIM strategic partnership, the Scheme will be creating a small Executive Office of pension and investment specialists to support the Trustees in the management2 of the £17bn total portfolio of Scheme assets. LGIM will also be providing total portfolio solutions to the Trustees through the Executive Office. The Executive Office will be headed from 1st November by Rob Schreur, currently CIO of Philips Pension funds, whose appointment was announced in July 2015.
Fenchurch Advisory Partners acted as financial adviser to the National Grid UK Pension Scheme on the sale of Aerion.
1Value of portfolios being transferred to LGIM as at 30th June 2015
2As this includes reviewing appointments for all external fund managers, post-completion portfolio allocations, including those managed by LGIM, may vary over time.
Notes to editors
NATIONAL GRID UK PENSION SCHEME:
The National Grid UK Pension Scheme is a UK corporate defined benefit pension scheme closed to new members, which is responsible for approximately £17bn of assets under management. The Scheme manages assets on behalf of approximately 107,000 members (comprising predominantly members from the gas transmission and distribution businesses) from several participating employers.
Aerion Fund Management is an FCA-authorised fund manager fully owned by the Trustees of the NGUKPS, which currently manages around 75% of the Scheme's assets (£13bn), with the remainder being managed by external asset management companies.
The long term strategic partnership agreed with LGIM relates to the management of the initial £13bn of Scheme assets that are currently managed by Aerion. The Executive Office will be responsible for the oversight of the management of the entire Scheme asset portfolio comprising £17bn of assets under management.
Rob Schreur has led the €18 billion Philips Pension Funds for the last 10 years, having transferred in 2005 from the Philips Pensions Competence Center where he was head of institutional clients. Rob began his career in investment at ABP.
LEGAL & GENERAL INVESTMENT MANAGEMENT:
Legal & General Investment Management (LGIM) is one of Europe's largest institutional asset managers and a major global investor. LGIM manages £725.9 billion in total assets for more than 3,000 clients*. Throughout the past 40 years we have built our business through understanding what matters most to our clients and transforming this insight into valuable, accessible investment products and solutions. We provide investment expertise across a full spectrum of asset classes including equities, fixed income, commercial property and cash. Our capabilities range from index-tracking and active strategies to liquidity management and liability-based risk management solutions.
*As at 30 June 2015; total assets include assets under management, notional derivative positions and advisory assets.
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