Vestey Group has conducted a £280 million ($464.4 million) bulk annuity deal with Rothesay Life for its pension fund, Western United Group Pension Scheme, London, said Ben Fowler, group head of reward and HR development for the firm.
The deal completes a £500 million buyout of the pension fund. Mr. Fowler said this latest transaction follows two buy-ins totaling about £220 million with Rothesay in November 2012 and March 2014. This last deal is a buyout for the remaining liabilities. The fund will be wound up after the buyout is completed.
The most recent agreement was facilitated by F&C Asset Management, said Mr. Fowler. F&C helped pension fund executives with a growth strategy through equity-linked bond funds; a derisking strategy with liability-driven investment funds; and with the transition to Rothesay Life.
Simon Bentley, director of client relations at F&C, said in a telephone interview that the buyout was unique from the LDI point of view, because assets were invested in a pooled fund. In the past, a pension fund’s pooled LDI assets would have to be sold out to cash, then passed to the insurer. This was expensive and incurred market risk due to a time gap.
“We have set up an interim step — (we took) the pro-rata slice of the original fund, moved those positions into our transition fund (the LDI Transition Fund), and reorganized those positions to look like what the insurer would like to take” Mr. Bentley said.
Mr. Bentley said the transition fund was originally set up to accommodate new investors in LDI pooled funds. He said it was used as an interim step to convert positions to those suitable for the pooled funds.
“It is definitely unique for facilitating the disinvestment of a client to move to buyout,” Mr. Bentley said. He said the manager believes it saved the client “in excess of £850,000” by facilitating the transaction in this way.