UK - The £2.9bn Diageo Pension Scheme has reaffirmed its commitment to equities - despite an FRS17 deficit of nearly £1bn.
The scheme’s annual review reveals that its deficit grew from £336m at the end of June to £950m at the end of October. The increase is largely due to its decision to stick with a high equity weighting – 81.7% as at the end of March.
Diageo chairman Gareth Williams said: “Pension scheme financing is a very long-term business and the trustees’ approach to investing the fund fully recognises this.
“The company and trustees are not unduly concerned about stock market volatility and expect the markets to recover over the fullness of time.”
The annual review also revealed that the scheme dropped Merrill Lynch Investment Managers from a £280m UK equities mandate earlier this year and replaced it with Glasgow Investment Managers.
UK pensions director Graeme Robertson said the decision was made over concern at staff turnover at MLIM.
“It creates turmoil and uncertainty, and we are looking for companies that can give us long-term certainty.”
By contrast Robertson was impressed by Glasgow’s stability.
“It seems to be pretty independent people who pick stocks that they like and keep away from stocks that they don’t like even though the rest of the market might be chasing those.”
In the year to March 31, Diageo’s investment income of £98.9m was outweighed by scheme expenditure of £168.8m leaving a shortfall of £69.9m.
The scheme’s investment adviser is Hewitt Bacon & Woodrow.
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