Global Pensions Wrap: January edition
Can anything stop the flood of US pension capital into direct lending? Our of pensions stories from around the FT’s global outlets looks at two state retirement systems making aggressive moves in the asset class, and also sees the world’s largest pension fund sounding the alarm on stock lending.
The month in numbers
- Equitable Life has transferred its remaining £6bn in assets to specialist Utmost, 20 years after it came close to collapse
- Romanian state pensions are set to increase by 40 per cent in September
- Arizona's state pension fund wants $1 in every $6 of its investments to flow into private credit
Scandal-hit insurer Equitable Life finally leaves the stage
FT: Life insurer Equitable Life has finally wound up with its sale to private equity-backed Utmost on December 31, almost 20 years after the scandal-hit company came close to collapse. Guaranteed annuity rates crippled the company in 2000, leaving it unable to pay out on pension and insurance promises. Policyholders lost billions, but the transfer of the remaining £6bn of assets and 300,000 former customers to Utmost will give them some respite. Member groups say the government’s compensation for regulatory failures, around £1.5bn in total, falls short of what it has admitted it owes.
GPIF CIO cites ‘short-termism’ as reason for ending securities lending
Ignites Asia: Japan’s government pension fund has stopped providing securities lending, with its chief investment officer revealing that the impact of short-sellers on wider markets and low levels of transparency led to the decision. Hiro Mizuno said that short-sellers are fuelling short-termism, which he described as a “disease in this industry”. The world’s largest pension fund may reconsider its stance if transparency in the market improves, allowing the fund to see how its lent stock is being used and by whom.
Alabama pension bets $221m on hungry, well-heeled movie-goers
Fundfire: An Alabama state pension fund is taking control of a failing cinema and restaurant chain as part of its commitment to direct lending. The Retirement Systems of Alabama, which manages assets for teachers and other public sector employees in the state, took over iPic and its 16 locations in a $221m (£167.5m) deal after the company entered bankruptcy. The pension fund was a significant creditor and equity investor in the chain before it went bust, and after sacking several executives it is betting that its close knowledge of the business will help lead a turnaround.
Romania PM outlines pro-business agenda but sticks by pension rise
FT: Romania’s new prime minister has pledged to uphold a significant increase to state pensions promised by the previous government, despite fears that the measure is not sustainable. Ludovic Orban’s agenda was largely pro-business, removing corporate taxes in an attempt to attract investment in the country. He told the Financial Times that to renege on the promise of a 40 per cent pension increase, due to take place in September, would be to lose voters’ trust and the next election.
Arizona state pension looks at big direct lending boost
Fundfire: Arizona’s State Retirement System is weighing up allocating 17 per cent of its entire portfolio to private debt, as it joins a trend of state pensions piling into the asset class. The fund has been a direct lender since 2013, and is now looking to raise its allocation from its 13.6 per cent, so that $1 in every $6 will flow into the loans. Several large systems have chased the same play seeking a premium and increased security over bond investments, although Preqin data show that only 3 per cent of pension portfolios are allocated to this asset class.