UK - WH Smith has hired State Street Global Advisors to manage its £850m pension fund according to the liability driven investment approach.
WH Smith said the fund had adopted the LDI approach to allow the company to “limit the volatility in the fund and the resultant risk of a significant increase in the overall deficit.”
The key features of this fund restructuring are as follows: - 94% of the fund’s assets are invested in an LDI structure with SSgA - 6% of the fund’s assets have been used to purchase a portfolio of long-dated equity call options. These represent a notional exposure to underlying equities of some £350m.
The overall expected rate of return from the portfolio under the new arrangements is 5% in the 2005/06 financial year.
Kanesh Lakhani, head of European marketing and consultant relations, SSgA said the firm was in talks with a number of reasonably mature pension schemes looking at similar solutions.
WH Smith has contributed £142m to its pension scheme this year, narrowing the deficit to £94m.
Earlier this year pensions came to the fore at WH Smith when Permira pulled its bid for the retailer after it failed to reach an agreement with the trustees as to how the deficit was to be paid down. At that stage the scheme was over £200m in deficit.
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