UK - The £7bn ICI Pension Scheme has transferred £1.5bn worth of gilts to corporate bonds and reduced its exposure to UK equities following a wholesale portfolio restructuring.
The change was made due to the super-maturity of the scheme – it currently has only 3000 active members and 65,000 pensioners.
The transfer was processed throughout the year – the results of which were revealed in ICI’s annual reports published last week.
An ICI spokesman said: “Responding to the increasing maturity of the fund, the proceeds of the fund also went to corporate bonds to match the fund’s liabilities.
The spokesman said that the number of active members had fallen from 15,000 to 3000 over the last three years. The reduction was due to a large number of disposals of heavy chemicals business in 1987.
Merrill Lynch Investment Managers won the mandate to manage £550m of the newly acquired corporate bonds.
All the other fixed income securities are on cash-flow matching basis and are managed by Barclays Global Investors.
The scheme also decreased its equity exposure – which has been cut from 45pc to 30pc.
On speculation that the scheme was concerned with the large weighting Vodafone has in the UK FTSE-100 Index, the source said: “ICI Pension Fund received advice about the general risks posed by the concentration of the FTSE-100 index in a smaller number of stocks and sectors than previously, but this advice did not single out any particular companies.”
Following the reorganisation, the number of active equity managers was reduced to two. Schroders lost mandates including a gilts mandate totalling £954m and Phillips & Drew lost £310m gilts mandate it had managed, but retained a £280m equity mandate.
Lombard Odier – with a £220m equity mandate – was also dropped in November last year.
Fidelity was retained with a £350m mandate and will continue to manage non-UK equities with a remit for a widely diversified portfolio. BGI continues as passive equity manager.
The scheme was advised by Watson Wyatt.
By Shifa Rahman
Most respondents in this week's Pensions Buzz do not think businesses should be able suspend AE contributions if in financial distress.
Former BHS owner Dominic Chappell has lost the appeal against his section 72 conviction and sentence for failing to hand over information to The Pensions Regulator (TPR).
This week's top stories include Marsh and McLennan Companies agreeing to buy JLT, and the home secretary calling for AE to be scrapped in a no-deal Brexit scenario.
Lesley Titcomb says the watchdog wants closer interactions with pension funds to spot problems sooner and act before having to use its more stringent powers