In the largest outsourced chief investment officer mandate in the UK to date, the BAE Systems pension trustees have hired Goldman Sachs Asset Management to look after £23bn in assets. The pension investment team of the defence giant will join the Wall Street firm. 

 

Following a tender process, the trustees of the BAE Systems Pension Scheme and BAE Systems Executive Pension Scheme chose Goldman, which announced the deal on Wednesday. The asset management and team transition are expected to take place towards the end of this year. 

 

“The in-house management team has delivered excellent stewardship of the schemes’ bespoke investment strategies over many years. We are delighted that this agreement with Goldman Sachs Asset Management brings together both the expertise of our in-house team and the full capabilities of Goldman Sachs and we look forward to working together to continue to provide long-term value for our members,” said Andrew Gallagher, who chairs both trustee boards. 

  

Brad Greve, BAE Systems group finance director, said the schemes’ funding level had moved from a large deficit to a surplus, and predicted further derisking. 

 

He said: “As we continue to look at ways to further derisk pension liabilities, reducing the cost and improving the efficiency of asset management are essential. Goldman Sachs Asset Management will offer both, and we’re pleased that our in-house team will have access to the broader career paths available within such a global leader. This move doesn’t limit BAE Systems’ flexibility in exploring further ways of reducing our pension risk, and we’ll continue to be dynamic in managing this risk going forward.” 

 

As it is updating pension arrangements, the scheme also replaced its third-party administrators earlier this year. 

 

   

The mandate win expands Goldman’s position in the UK liability and cash flow-driven investments markets, adding to the roughly £175bn managed by the firm globally in such portfolios. Goldmans says it is the second largest OCIO manager globally and one of the largest in the UK, with total global OCIO assets under supervision of more than £200bn. 

 

The win is significant for Goldman’s after its failed foray into retail banking and the lay-off of about 3,200 employees earlier this year. It signals the firm’s ambition to grow asset management revenues globally, with DB pension assets being on the radar as trustees and sponsors look to reposition portfolios and take advantage of increased funding levels. 

 

David Solomon, Goldman’s chief executive, said: “We are proud to partner with BAE Systems and the trustees to deliver this long-term solution, which brings the full capabilities of Goldman Sachs to the benefit of BAE Systems’ Pension Schemes.” 

  

Ed Francis, head of UK fiduciary management, added: “This partnership underscores our deep commitment to the UK pensions market and reflects our position as a leading provider of solutions for pensions and institutional clients across Europe. We are pleased to welcome the team to Goldman Sachs – their expertise will continue to provide significant value to the schemes and our broader client base.” 

 

OCIO mandates are a way for large pension schemes to outsource investment decisions and the appointment of underlying managers, while still typically retaining an investment consultant to set the strategy and offer advice. 

 

BlackRock has won two of the recently publicised OCIO mandates in the UK, by the British Airways pension trustees and the Royal Mail trustees. Cardano recently won an OCIO brief from Northumbrian Water. 

 

   

   

    

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