ILLIQUIDITY FRAMEWORK FOR A LARGE UK DEFINED BENEFIT PENSION SCHEME

Situation

The CIO function of a large UK defined benefit pension scheme wanted to allocate c. £1bn to low risk, illiquid credit, split between long  dated inflation linked credit and illiquid credit assets. To date, the governance and resources required to identify, filter and assess the suitability of these opportunities, as well as the work required to monitor and oversee implementation, had hindered progress.

The Scheme had an overarching advisor in place; however the CIO function felt Redington was best placed to assist them on this particular project.

 

Task

Redington was approached to assist the CIO function in designing, developing and delivering a framework that would allow certain responsbilities to be delegated to Redington for both Core Illiquid Credit and Opportunistic Illiquid Credit.

 

Action

All stakeholders, including the Trustee and CIO function worked together to design a framework that created accountability across the board and included clear goals and objectives, clear roles and responsbilities, a clear reporting framework, key performance indicators, and investment guidelines and constraints.

 

Result

After being appointed in September 2013 (this is an ongoing project), we engaged with the Scheme and the trustees to ensure that all stakeholders are now comfortable with the asset class through education sesssions, a corporate linker manager has been appointed and the IMA agreed, and the stakeholders are now considering the prospect of infrastructure debt.

 

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