The UK is seeing the launch of its first so-called superfund, designed to consolidate defined benefit schemes, with an initial £500m of capital subject to transaction approvals.
The superfund is led by former Pension Protection Fund chief executive Alan Rubenstein.
Both Warburg Pincus and Disruptive Capital, the private equity firm of Edi Truell, founder of buyout specialist Pension Insurance Corporation, have invested in the venture.
The Pension SuperFund will accept bulk transfers of DB assets and liabilities and consolidate them into a single scheme.
"The advantages of scale provided by consolidation will enable The Pension SuperFund to achieve higher investment returns, stronger risk management and lower costs," its founders said.
Apart from Rubenstein the team behind the superfund includes Marc Hommel, a former PwC partner, and Luke Webster, chief investment officer of the Greater London Authority.
Rubenstein said: “We are already in discussion with several pension funds and their sponsoring employers, as well as the professional advisers that support them."
The government published its long-awaited white paper on DB sustainability on Monday, saying it encourages the creation of commercial consolidators.
However, it noted there is currently no authorisation and supervision process for such vehicles, and it is unclear whether superfunds would be eligible for entry into the PPF if they fail.
The Department for Work and Pensions proposed that commercial consolidators should not need to fund schemes at the level insurance companies buying scheme liabilities do, but the funding requirements would be higher than for DB schemes that remain linked to a sponsor.
However, it said there could also be models where the sponsor retains a connection to the scheme via an equity stake or debt repayment arrangements.
