UK - The UK arm of the Philips Pension Fund is considering hiring a fiduciary manager, according to industry sources.
The £2.3bn (US$4.7bn) fund has begun negotiations with consultants about the options available to it following its move to a liability driven investment (LDI) strategy in October.
The pension fund is already advised by a consultant on investment issues, but has apparently decided it may need more specialist advice on new strategies. Sources close to the negotiations, who wished to remain anonymous, said discussions were focusing on the governance issues thrown up by this change in direction.
In 2005, Merrill Lynch Investment Management (MLIM), now BlackRock, acquired the internal investment management units of Royal Philips Electronics as part of a strategic partnership with the Philips Pension Fund.
The transaction included a seven-year contract to manage US$16bn for the Netherlands arm of the fund in a deal which was seen to have its roots in fiduciary management. This subsequently led to the departure of several key figures from the fund’s investment team.
However, Erik van Dijk, partner and CIO at Netherlands-based Compendeon Pension and Investment Management, claimed fiduciary management had changed greatly since the original deal.
He said: “The MLIM deal was more or less equivalent to a seven-year takeover, more like an M&A deal in which the original seller will be back in control after seven years, and this is what led to the subsequent integration problems. It was therefore more far-reaching than the fiduciary products we see in the market today, albeit not as far-reaching as the pure pension plan takeover propositions made by firms like Paternoster in the UK.
"Any regular UK fiduciary management deal now could again be very different in design and implementation, so it is premature to compare things with what happened in the Netherlands. There are substantial differences in the pensions landscape between the two countries. For instance, the role of consultants is totally different.”
The Philips UK plan’s move to LDI saw State Street Global Advisors (SSgA) lose an equity mandate worth around £500m, while a corporate bond mandate managed by Barclays Global Investors (BGI) was reduced from £1.3bn to approximately £200m.
It is understood the pension fund hired Aberdeen Asset Managers, AllianceBernstein and Goldman Sachs Asset Management to deliver an overlay of credit default swaps. In keeping with their policies, both Philips and its pension fund declined to comment.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.