BA Pensions to Exit In-House Management for BlackRock OCIO Deal

Posted on 06/02/2021

The trustees of British Airways’ pension schemes (BA Pensions) made a move to outsource all directly managed assets to BlackRock in the largest OCIO deal to date in the U.K. OCIO stands for outsourced chief investment officer. This brings closure to one of England’s more experienced independent in-house teams. Employees of provider British Airways Pension Investment Management Limited (BAPIML), including CIO David Stewart and Deputy CIO John St Hill, have transferred to BlackRock, alongside some from the administration unit. The property team under Paul Scott also moved to BlackRock. BlackRock was selected following a competitive tender process.

The new OCIO mandate covers £21.5 billion (US$ 30.5 billion) in assets, representing the combined uninsured assets of the Airways Pension Scheme (APS) and New Airways Pension Scheme (NAPS), two of the U.K.’s largest corporate defined benefit pension schemes. Roughly £5.3 billion of the APS fund’s liabilities have already been insured through buy-ins. The two defined benefit pension funds have more than 85,000 participants.

BA Pensions named a number of key reasons for the move. Some reasons intensified regulation, higher operational costs, and increased investment complexity.

It also said the investment needs of its maturing pension schemes had changed considerably, requiring an increased focus on managing investments to provide an income that matched members’ pension benefits.

“Operating as our in-house investment manager, BAPIML has delivered excellent investment performance and stewardship of the schemes over many years,” said Roger Maynard, chair of trustee APS and NAPS trustee. “This agreement is the necessary next step in the evolution of the schemes as they look to enhance their respective investment strategies, working toward their funding goals.”

PricewaterhouseCoopers worked with British Airways, the trustees, and other advisers on the deal. PricewaterhouseCoopers sees the U.K. OCIO market standing at more than £200 billion.

European corporate pensions are eyeing OCIO opportunities. Several years ago, National Grid dumped of its in-house manager Aerion Fund Management. Aerion Fund Management was sold to Legal & General Investment Management in September 2015. Nestle moved to have some internal funds be managed by BlackRock.

Keywords: British Airways Pensions Investment Management Ltd.

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