British Airways, Harmondsworth, England, appointed BlackRock as outsourced CIO for £21.5 billion ($30.5 billion) in assets in two plans.
The airline and money manager said in a joint news release that the deal covers assets directly under management that have, until now, been run by BA's in-house manager, British Airways Pension Investment Management Ltd.
It covers the New Airways Pension Scheme, which had £19.4 billion in assets as of March 31, 2020 — the latest available figure, and the Airways Pension Scheme, which had £7.4 billion in assets as of March 31, 2020.
About £5.3 billion of the APS fund's liabilities have already been insured through buy-ins. The managing of the remaining non-insurance assets — about £2 billion — has transferred to BlackRock under the new agreement, a spokesman for BA confirmed.
The two defined benefit pension funds have more than 85,000 participants.
The assets will be managed by a team at BlackRock and transferred BA Pensions staff to ensure the continuity of key knowledge as well as the pension funds' operational and reporting cultures.
All BAPIML and British Airways Pension Services Ltd. employees who have been identified by BA as being primarily engaged in servicing the pension funds have transferred to BlackRock, according to a person familiar with the situation. Transfers include David Stewart, CIO, and John St.Hill, deputy CIO.
BA in the news release cited intensified regulation, rising operational costs and increased investment complexity, as well as maturing pension funds and changing investment needs, as reasons for the partnership with BlackRock. The appointment followed a competitive procurement process.
"Operating as our in-house investment manager, BAPIML has delivered excellent investment performance and stewardship of the schemes over many years," Roger Maynard, chairman of the trustees of both pension funds, said in the release. "This agreement is the necessary next step in the evolution of the schemes as they look to enhance their respective investment strategies, working toward their funding goals."
NAPS and APS have a total about £26.8 billion in assets. A continuous performance review process is also in place to ensure the pension funds' objectives are met.
PricewaterhouseCoopers worked with BA, the trustees and other advisers on the deal.
The structure — whereby large pension funds retain control of the investment strategy and asset allocation while also benefiting from operational efficiencies of one money manager — is becoming a trend, Keira-Marie Ramnath, pensions asset management outsourcing lead at PwC, said in an emailed comment.
The U.K. OCIO market stands at more than £200 billion. "But there are £1.8 (trillion) defined benefit pension assets in the U.K., and, given the benefits that can be achieved, we're expecting to see the market continue to grow substantially," Ms. Ramnath said.
