Northumbrian Water pension scheme picks OCIO
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The £830m Northumbrian Water Pension Scheme has hired pensions advisory and investment management specialist Cardano as its outsourced chief investment officer.
The trustees appointed the OCIO to design and implement the scheme’s strategic asset allocation, while WTW will continue to be the investment consultant on the scheme.
Duncan Willsher from professional trustee firm Vidett, who chairs the pension fund, said about the appointment: “We wanted an OCIO who could offer a sophisticated strategy, flexible implementation and a collaborative approach to working with the scheme’s stakeholders and other advisers.”
While some schemes benefit from comprehensive fiduciary management services, larger pension plans with sophisticated governance models “are increasingly looking for OCIOs who can be flexible in the services they offer”, believes Patrick Cunningham, partner and co-head of clients at Cardano.
Cardano said the pension fund’s strategic asset allocation will initially be implemented using sustainable equities, investment grade corporate bonds, specialist active managers, several of the scheme’s existing investments as well as government bond and inflation overlays. The Anglo-Dutch firm, which also owns master trust Now Pensions, will manage the scheme’s liability hedging portfolio in-house on a segregated basis.
The firm emphasised its inclusion of sustainability criteria, including making the equity portfolio water neutral by 2030, investing in green bonds, an environmental, social and governance scoring system for active managers, and partly taking account of investment banks’ sustainability in the allocation of transactions for the liability hedging portfolio.
OCIO is becoming more common in UK pensions as a way for trustees to outsource more of the investment management decisions without giving up as much of the process to a third party as in fiduciary management.
In June 2021, British Airways Pensions appointed BlackRock as the OCIO of its pension assets to better match benefits and deal with increased regulatory and investment complexity, transferring about £21.5bn alongside former in-house investment team members.
BlackRock was also hired by the Royal Mail Pension Plan in February this year, taking on the management of £8.8bn of assets and several people of the scheme’s investment team.
