We exploit dislocations in markets and unlock value from complex situations using a Get Rich and Stay Rich strategy. This strategy has given rise to returns over 23 years of 28% p.a. Net IRR
By Benjamin Robertson and Lucca De Paoli
Private equity and credit firms have elbowed their way into everything from real estate to corporate lending. Now they’re cracking open Britain’s growing pension-transfer market.
A partner of U.S. buyout giant TPG and Disruptive Capital Finance, TPG partner is among firms backing new pension superfunds Debut transfer deals may soon be cleared by U.K. regulator owned by the Truell family office, are backing so-called superfunds that are poised to enter the business of taking over costly pension funds from companies struggling to keep them going. Insurers, which dominate the market, are expected to do more than 30 billion pounds ($38.7 billion) of transfer deals this year, according to consultants Lane Clark & Peacock.
Investors desperate for yield in the world of negative interest rates are increasingly turning to private equity firms in search of returns. This has fueled the PE industry’s expansion beyond the leveraged-buyout deals that remain their stock-in-trade. In the U.K., superfunds are awaiting approval of their debut deals from a regulator that’s pushing for consolidation.
U.K. companies have spent the last few decades trying to rein in their pension costs, which have soared as employees live longer, regulation tightens and returns on traditional investments such as bonds decline. This applies particularly to direct-benefit programs that promise employees regular payments or a lump-sum payoff when they retire. While few firms offer these plans any longer, they have to shoulder the cost as long as existing pensions remain on their books.
Buy-Out Deals
In the current market, companies can buy so-called bulk annuity policies from insurance companies such as Legal & General Group Plc and Rothesay Life Plc. Under these policies, insurers acquire the pension fund’s assets as well as the obligation to make pension payments to its members. These so-called buy-out deals are costly, however. Walmart Inc. will incur a pretax charge to earnings of about $2.2 billion as part of its plan to offload a retirement plan for employees of its British subsidiary Asda to Rothesay Life.
Private equity firms have a piece of this action through their investment in insurers such as Rothesay Life, which counts Blackstone Group Inc. and Singapore’s sovereign wealth fund GIC Pte among its backers. Now they’ve set their sights on the struggling pension funds that can’t afford insurance.
That’s where the superfunds come in. They argue that because they don’t face the costly capital requirements imposed on insurers, they can consolidate and manage pension plans at lower cost and generate better returns. The U.K. government supports the emergence of superfunds, which it says could improve funding for many pension programs as well as their investing power and governance.
‘Huge Scope’
“There is huge scope for consolidation,” said Adam Saron, founder of Clara-Pensions Ltd., a consolidator backed by private credit investor TPG Sixth Street Partners. The firm’s first deal, a transfer involving less than 100 million pounds of assets, should receive the regulator’s blessing early next year, and more are in the pipeline, he said.
The Pension SuperFund, backed by Disruptive Capital, expects clearance of its first deal as soon as this month, and several billion pounds of potential transfers are in the works, according to Managing Director Antony Barker.
Edmund Truell, a founder of Disruptive Capital, said the regulator’s support for superfunds is a key part of their appeal to investors. He makes the case that firms like his have the investing chops and financial backing to turn things around for the “vast majority” of ailing pension funds that may never be able to afford insurance and are too small to save themselves.
The U.K. government’s support isn’t unequivocal, however. It also warns of “clear risks” in allowing superfunds to set up shop without new regulations to protect retirees, and has proposed measures to prevent these companies from undermining insurers by doing transfer deals with pension funds that can afford a buy-out. The government issued its proposal nearly a year ago, but hasn’t yet presented draft legislation to Parliament.
02/06/2023
An experienced team of Private Markets analytics specialists supporting the industry renowned work of Professor Oliver Gottschalg of HEC Paris is delighted to announce the launch of Gottschalg Analytics as an independent second-generation provider of performance intelligence services for the Private Markets.
30/03/2023
Pension Insurance Corporation Group Limited1 ('PICG' or the 'Company'), ultimate parent company of Pension Insurance Corporation plc ('PIC'), the specialist insurer of UK defined benefit pension schemes, today announces its final results for the 12 months to 31 December 2022.
13/03/2023
DCAC announced proposals to form the Advanced Cables Business Combination in the press release issued by the Company on 20th February 2023. The DCAC Board has now decided to expedite the proposals, and DCAC has therefore agreed an exclusive option to acquire the holding company of Advanced Cables, Global InterConnection Group SA (“GIG” or the “Target”). Besides Advanced Cables, GIG is also the holding company of ASC Energy Limited. It is intended that DCAC will be renamed "Global InterConnection Group Limited" on completion of the Business Combination.
11/11/2022
Long Term Assets Limited ("Long Term Assets" or "LTA"), a Guernsey investment company, today announces its intention to admit its shares to trading ("ITF") on the Specialist Fund Segment of the Main Market of the London Stock Exchange. LTA will then launch a 12-month placing programme, aimed in particular at UK pension funds and other long-term savers. Read more.
10/11/2022
Cyro Cyber has been created to address the dynamic and expanding cyber security requirements of Telent’s core markets across critical national infrastructure, telco service providers and other highly regulated sectors.
01/04/2022
Pension Insurance Corporation Group Limited (“PICG” or the “Company”), ultimate parent company of Pension Insurance Corporation plc (“PIC”), the specialist insurer of defined benefit pension schemes, today announces its final results for the 12 months to 31 December 2021.