Skip to main content
MENU
Subscribe
  • Subscribe
  • Account
  • LOGIN
  • Topics
    • Alternatives
    • Consultants
    • Coronavirus
    • Courts
    • Defined Contribution
    • ESG
    • ETFs
    • Hedge Funds
    • Industry Voices
    • Investing
    • Money Management
    • Opinion
    • Partner Content
    • Pension Funds
    • Private Equity
    • Real Estate
    • Russia-Ukraine War
    • SECURE Act 2.0
    • Special Reports
    • White Papers
  • Rankings & Awards
    • 1,000 Largest Retirement Plans
    • Top-Performing Managers
    • Largest Money Managers
    • DC Money Managers
    • DC Record Keepers
    • Largest Hedge Fund Managers
    • World's Largest Retirement Funds
    • Best Places to Work in Money Management
    • Excellence & Innovation Awards
    • WPS Innovation Awards
    • Eddy Awards
  • ETFs
    • Latest ETF News
    • Fund Screener
    • Education Center
    • Equities
    • Fixed Income
    • Commodities
    • Actively Managed
    • Alternatives
    • ESG Rated
  • ESG
    • Latest ESG News
    • The Institutional Investor’s Guide to ESG Investing
    • ESG Sustainability - Gaining Momentum
    • Climate Change: The Inescapable Opportunity
    • Impact Investing
    • 2022 ESG Investing Conference
    • ESG Rated ETFs
  • Defined Contribution
    • Latest DC News
    • DC Money Manager Rankings
    • DC Record Keeper Rankings
    • Innovations in DC
    • Trends in DC: Focus on Retirement Income
    • 2022 Defined Contribution East Conference
    • 2022 DC Investment Lineup Conference
  • Searches & Hires
    • Latest Searches & Hires News
    • Searches & Hires Database
    • RFPs
  • Performance Data
    • P&I Research Center
    • Earnings Tracker
    • Endowment Returns Tracker
    • Corporate Pension Contribution Tracker
    • Pension Fund Returns Tracker
    • Pension Risk Transfer Database
    • Future of Investments Research Series
    • Charts & Infographics
    • Polls
  • Careers
  • Events
    • View All Conferences
    • View All Webinars
    • 2022 Retirement Income Conference
    • 2022 Managing Pension Risk & Liabilities
    • 2022 WorldPensionSummit
Breadcrumb
  1. Home
  2. Print
June 14, 2004 01:00 AM

Boots turnabout no surprise to consultants

Shift from absolute all-bond strategy called smart way to continue to match liabilities

Shahnaz Mahmud
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    NOTTINGHAM, England — The decision by Boots Co. PLC's pension fund to abandon its 100% bond allocation is not a shock to U.K. consultants and money managers.

    Three years after the £2.84 billion ($5.21 billion) plan boldly abandoned equities, the company last month announced plans to shift 15% of the pension money into other asset classes, including equities. The move was made to better match long-term liabilities, which trustees. thought could be better achieved through other asset classes, said Chris Laud, investor relations analyst at Boots.

    Actuarial consultants Hewitt Bacon & Woodrow, London, assisted. Hewitt officials did not return calls by press time.

    This isn't a change in strategy; the goal has always been to achieve the best liability match, Mr. Laud added.

    He would not provide details on the money managers to be hired or how the 15% will be allocated. He said no decision has been made as to how much money sole manager Legal & General Investment Management, Ltd., London, will continue to run for Boots. He declined to give a timeframe for the change.

    Consultants and money managers were not surprised by Boots' decision.

    ‘Not a believer'

    "Personally, I'm not a believer in absolute strategy," said Tim Gardner, global head of Mercer Investment Consulting, London, referring to Boots' highly publicized shift into 100% bonds. "I wouldn't advise my clients to do that," he added.

    Mr. Gardner emphasized that the plan's latest strategic move reflects the realities of investments — in trying to match assets to liabilities.

    Overall, there's been more of a trend over the past 18 months of going into riskier assets, said Gary Marshall, sales and marketing director at Aberdeen Asset Management, London, who also said Boots' recent announcement is not an eyebrow-raiser. "Fundamentally, if you restrict yourselves to bonds, you can expect reduced returns. For the long term, you've got to increase returns overall," which equities can do.

    Vincent de Martel, director, structured and alternative investment management at AXA Investment Managers U.K. Ltd., London, sees Boots as a "smart pension scheme" and said he views the slight shift into equities as a continuation of the company's liabilities-matching exercise, which started with the 100% allocation to bonds. It's not necessarily a reassessment, said Mr. de Martel, who agreed that for the long term, a pension plan should have equity exposure.

    George Henshilwood, partner at consultancy Hymans Robertson, Glasgow, said it's not a huge surprise that Boots made the move — especially since John Ralfe, Boots' former head of corporate finance and the man who spearheaded the move to bonds, left the company a year after the switch.

    ‘Philosophical change'

    But, he said, the move was a surprise in that it's a "philosophical change" for the pension fund. Mr. Henshilwood believes it's not unreasonable to have some equity risk on the balance sheet. Trustees, however, have agreed to a change that will increase risk, which might cause some discomfort, as a 100% bond allocation provides safeguards that equities don't, he added.

    The phrasing Boots used — that the change is to better match its long-term liabilities — suggests "they kind of didn't get it right the first time," said Roger Urwin, global head of investment consulting at Watson Wyatt LLP, London. "The new allocation is what we'd suggest to our clients," he added.

    Recommended for You
    Read the print edition of P&I
    Read the print edition of P&I
    How low is low? Projections say it's not low enough
    How low is low? Projections say it's not low enough
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    FINRA honors Wharton's Olivia Mitchell with Ketchum Prize
    Emerging Markets: A Selective Approach
    Sponsored Content: Emerging Markets: A Selective Approach

    Reader Poll

    June 6, 2022
    SEE MORE POLLS >
    Sponsored
    White Papers
    Nearing the finish line: Ideas on end-state investing for corporate DB plans
    The Meaning of "Portfolio Intelligence"
    Credit Indices: Closing the Fixed Income Evolutionary Gap
    Forever in Style: Benchmarking with the Morningstar® Broad Style Indexes℠
    Crossroads: Politics, Inflation, & Bonds
    Is there a mid-cap gap in your DC plan?
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today
    June 20, 2022 page one

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    130 E. Randolph St.
    Suite 3200
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2022. Crain Communications, Inc. All Rights Reserved.
    • Topics
      • Alternatives
      • Consultants
      • Coronavirus
      • Courts
      • Defined Contribution
      • ESG
      • ETFs
      • Hedge Funds
      • Industry Voices
      • Investing
      • Money Management
      • Opinion
      • Partner Content
      • Pension Funds
      • Private Equity
      • Real Estate
      • Russia-Ukraine War
      • SECURE Act 2.0
      • Special Reports
      • White Papers
    • Rankings & Awards
      • 1,000 Largest Retirement Plans
      • Top-Performing Managers
      • Largest Money Managers
      • DC Money Managers
      • DC Record Keepers
      • Largest Hedge Fund Managers
      • World's Largest Retirement Funds
      • Best Places to Work in Money Management
      • Excellence & Innovation Awards
      • WPS Innovation Awards
      • Eddy Awards
    • ETFs
      • Latest ETF News
      • Fund Screener
      • Education Center
      • Equities
      • Fixed Income
      • Commodities
      • Actively Managed
      • Alternatives
      • ESG Rated
    • ESG
      • Latest ESG News
      • The Institutional Investor’s Guide to ESG Investing
      • ESG Sustainability - Gaining Momentum
      • Climate Change: The Inescapable Opportunity
      • Impact Investing
      • 2022 ESG Investing Conference
      • ESG Rated ETFs
    • Defined Contribution
      • Latest DC News
      • DC Money Manager Rankings
      • DC Record Keeper Rankings
      • Innovations in DC
      • Trends in DC: Focus on Retirement Income
      • 2022 Defined Contribution East Conference
      • 2022 DC Investment Lineup Conference
    • Searches & Hires
      • Latest Searches & Hires News
      • Searches & Hires Database
      • RFPs
    • Performance Data
      • P&I Research Center
      • Earnings Tracker
      • Endowment Returns Tracker
      • Corporate Pension Contribution Tracker
      • Pension Fund Returns Tracker
      • Pension Risk Transfer Database
      • Future of Investments Research Series
      • Charts & Infographics
      • Polls
    • Careers
    • Events
      • View All Conferences
      • View All Webinars
      • 2022 Retirement Income Conference
      • 2022 Managing Pension Risk & Liabilities
      • 2022 WorldPensionSummit