BAE Systems, London, is in discussions to outsource the investment management of its U.K. pension funds, a spokeswoman confirmed.
The arms, security and aerospace company had about £28 billion ($36.8 billion) in U.K. defined benefit assets as of March 31, 2022, according to the latest available data.
"We're in discussions with an external provider about the potential to outsource the investment management of our U.K. pension schemes," the spokeswoman said. "It would be inappropriate to comment further while those discussions are ongoing."
The assets of BAE Systems' U.K. pension funds are currently run by in-house manager BAE Systems Pension Funds Investment Management.
The BAE Systems Pension Scheme is made up of two sections.
The BAE Systems Section had £24.4 billion in assets and was 101% funded as of March 31, 2022. The asset allocation as of that date was about 35% to a matching portfolio including government bonds; about 21% to a "matching plus" portfolio, comprising alternatives such as infrastructure; and about 40% to growth portfolios, with private equity, equities and real estate exposures. The remaining assets were invested in cash and other assets, according to the pension fund's 2022 annual review.
The Airbus Section had £3.2 billion in assets as of March 31, 2022, with a 28% allocation to matching assets; 23% invested in its "matching plus" portfolio; 44% invested across growth portfolios; and about 5% in cash and other assets, according to its 2022 annual review. The funding level was 97% as of that date.
A number of large pension funds have moved to outsourced CIO arrangements over recent years, with some deals including the transfer of key in-house investment employees along with the assets. Royal Mail Pension Plan, London, moved £8.8 billion in assets and investment staff to BlackRock in an OCIO arrangement in February, while the manager also landed a $31 billion OCIO deal with British Airways to manage the assets of two pension funds in June 2021, with BA Pensions staff also moving to the firm.