UK - Hermes Pensions Management has blazed a trail among funds by making large market gains in the aftermath of the September 11 attacks.
Hermes – which is owned by the BT Pension Scheme and manages £45bn worth of pension assets – reportedly went on a £500m spending spree following large market falls in the wake of the terrorist attacks in the US. Hermes chief executive Tony Watson said it has since made large gains on its new investments. The FTSE100 market is almost 20%c higher than its September 21 low following the attacks.
It has been reported that Watson convened an emergency meeting immediately following the attacks where it was agreed to act quickly and buy selected shares.
While many other UK pension funds have seen a recovery in their equity holdings since September 11, not all have been able to make similar speculative investments to Hermes.
The £3bn London Pension Funds Authority chief executive Peter Scales said the LPFA had already been in the process of increasing its asset allocation in equities at the time of the attacks. But a negative cash flow limited the amount it could invest.
Threadneedle Investments joint head of UK and European equities Michael Taylor said other pension funds had taken advantage of buying equities cheaply, after he claimed the markets “over-reacted” to the September 11 attacks.
He said: “Investors by and large have not been that bullish during the year and had accumulated cash.”
He explained: “If your equity exposure has dropped quite significantly, you do feel a bit exposed about a possible rally.”
Taylor said also that he knew of other pension funds with fixed benchmarks which had also benefited from buying heavily after the market falls to restore equity exposures to their benchmark levels.
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