RMPP appoints BlackRock to manage DB assets

[RobertT]

https://www.pensionsage.com/pa/RMPP-app ... assets.php

The Royal Mail Pension Plan (RMPP) has selected BlackRock to manage its £8.8bn defined benefit (DB) scheme assets as an outsourced chief investment officer.

As part of the appointment, members of RMPP’s investment team will move to BlackRock and continue to manage the scheme’s investments, while being able to benefit from the scale and risk management capabilities of a full-service asset manager.

The transfer of staff and assets was completed yesterday (1 February).

Commenting on the news, RMPP chief executive officer, Richard Law-Deeks, emphasised that the trustee's main priority, "as ever", is to "ensure the retirement benefits of our members are well managed and protected".

He continued: “Our in-house team has delivered strong investment performance during some challenging markets over the last twenty plus years, meaning we are well funded. It is now time to consider how to lock in the stability and continuity of this position.

“With this agreement, we ensure that key institutional knowledge is retained, while benefitting from BlackRock’s wider expertise and scale. We have long worked with BlackRock and look forward now to deepening that partnership further.”

BlackRock head of UK business, Sarah Melvin, added: “We’re proud to be entrusted with managing the RMPP's assets. The scheme has been run exceptionally well by the in-house team to date and we’re excited to welcome them to BlackRock to continue to serve the plan’s evolving needs.

“BlackRock has been partnering with businesses as an outsourced chief investment officer since 2005, helping schemes meet their objectives and providing financial security for their members. We manage the savings of over 11 million people in the UK, and we believe strongly in putting people’s retirement needs at the heart of everything we do.”

Royal Mail is also planning to introduce a new collective defined contribution (CDC) scheme to replace the RMPP, which closed to future accrual in 2018, with the new collective plan expected to launch in early 2023, after Royal Mail previously confirmed that it had applied to The Pensions Regulator (TPR) for authorisation.

[NWpostie]

Was it Capita that managed RMPP previously ? Never heard of Black Rock.

I'm trying to keep up

[P13]

Was it Capita that managed RMPP previously ? Never heard of Black Rock.

I'm trying to keep up

I think capita run the RMSPS

[heapsy]

They do. But Black Rock are massive.

[milly]

George Osborne used our final salary Pension to pay off Government debt and now the most powerful and sinister Asset Management company on the Planet will run the DB scheme .

[RobertT]

There's nothing particularly new about Blackrock's involvement with the RMPP. Infact the last report and accounts states:

The majority of the Plan’s assets are in UK Government Gilts managed by BlackRock as part of the liability hedging strategy in the RMG Section. BlackRock bought the Plan’s first UK Conventional Green Gilt (2053) at £21m in late 2021.

Although there's a long list of other investment managers the scheme uses, many of which aren't exactly household names.

[RobertT]

Here's a bit more info on the new Blackrock arrangement:

https://www.pionline.com/searches-and-h ... royal-mail

Royal Mail Pension Plan, London, moved to an OCIO arrangement with BlackRock, with £8.8 billion ($10.8 billion) in assets and investment staff transferring to the money manager.

Three investment staff, including CIO Ian McKnight, moved to BlackRock on Wednesday, Richard Law-Deeks, CEO at the fund and who remains with RMPP, said in an interview. The arrangement followed a competitive procurement process.

The team will continue to manage the pension fund's investments and also benefit from BlackRock's resources.

The move comes ahead of the launch of Royal Mail's collective defined contribution plan, which will replace a defined benefit cash balance plan as well as the postal group's existing DC plan.

Executives had been thinking "strategically" about what the changes would mean for the in-house team and the investment strategy. The trustees wanted to maintain the in-house investment team and the knowledge they have of the sponsoring employer, Mr. Law-Deeks said, and the OCIO model presented the opportunity to retain the team and expertise, and also get the added benefit of technology and risk management expertise that comes with a large manager like BlackRock, he said.

BlackRock already managed the majority of the Royal Mail Pension Plan assets, Mr. Law-Deeks said, so a long-standing relationship was already in place, and BlackRock's previous experience in OCIO arrangements was also an attraction.

The move for Mr. McKnight — who has been involved in the OCIO process "every step of the way" — and his direct reports not only gives them the opportunity to work in the wider BlackRock team, but for the Royal Mail trustees "it reduces key-man risk," Mr. Law-Deeks added.
The key benefit, however, is that the arrangement "ensures continuity and stability for our members and their benefits, and the assets that will be used to pay those benefits," Mr. Law-Deeks said.

The three investment staff are now BlackRock employees, Sarah Melvin, head of BlackRock's U.K. business, confirmed in the same interview. "They've done a fantastic job on the scheme to date. They've delivered a great performance, and we're really looking forward to partnering with them and with Richard, to … manage it through the next leg of the scheme's journey."

Mr. McKnight and the legacy investment team has been incorporated into BlackRock's multiasset solutions function. "This function is fully independent of any other investment team or sales team at BlackRock," with the CIOs' only roles to act as fiduciary to the pension funds that they serve, Ms. Melvin said.

"And that's really important, but at the same time, investment teams sitting in that function have all the benefits of being in BlackRock, so whether that is … the scale we have in trading, or whether it's access to our risk management systems," as well as access to Aladdin, BlackRock's risk analytics and investment platform, and the research capability in terms of the BlackRock Investment Institute.

BlackRock has been hired for a number of OCIO arrangements over recent years, including by General Dynamics Corp. in July to manage $14 billion in assets. In June 2021, the firm landed a $31 billion OCIO deal with British Airways to run the assets of two plans. That deal involved the transfer of BA Pensions staff, including CIO David Stewart and Deputy CIO John St.Hill.

And while the Royal Mail team will focus on its plan for now, "over time, we'd expect that the team would have opportunities to work on other pension schemes in the future as the needs of the fund evolve," Ms. Melvin added.

For Mr. Law-Deeks and remaining RMPP employees, work continues on the plan. Part of the challenge is that, while the plan is well-funded — it was in surplus as of Sept. 25, according to the latest annual report by Royal Mail's parent company International Distributions Services — "we have a very young liability profile." The plan has a lot of active participants, "so that makes it very challenging … A lot of plans now are looking at derisking, buy-in, buyout — that's much more difficult for us. We've got a much longer time horizon than a lot of other plans," Mr. Law-Deeks said.

Royal Mail Pension Plan and trustees also considered a traditional fiduciary management approach — without transferring staff — and partnering with other pension funds, but "it just didn't feel like that would work for us where we were, and it didn't feel like it would … solve our key-man risk," Mr. Law-Deeks added.

The Royal Mail Pension Plan is made up of sections with different asset allocations, including liability-hedging assets.