National Grid agrees £13bn defined benefit pension mandate

The board of trustees of the National Grid UK Pension Scheme (NGUKPS) is entering into a long-term agreement with Legal and General Investment Management (LGIM) for the management of £13 billion of the scheme’s assets.


LGIM will acquire 100% of the share capital in Aerion Fund Management, which is fully owned by the trustees of NGUK and currently manages approximately 75% of the scheme’s assets. The remaining assets are managed by external asset management firms.

The National Grid UK Pension Scheme is a UK defined benefit (DB) pension scheme, responsible for around £17 billion of assets under management. It has some 107,000 members, mostly from the organisation’s gas transmission and distribution businesses, and is closed to new members.

LGIM will manage mandates for the scheme in fixed income, liability-driven investment (LDI) and equity asset classes.

The transaction is aimed at enhancing the risk-return profile of scheme assets and minimising operational risks involved in transitioning to a significantly different investment governance structure. It will also give trustees the flexibility to withdraw assets from the core portfolio and to transfer in assets from portfolios that are currently held by other third-party managers.

The transaction is expected to close by the end of 2015, subject to regulatory approval.

Fenchurch Advisory Partners acted as financial adviser to NGUKPS on the sale of Aerion.

Nigel Stapleton, chairman of the Scheme Trustee Board, said: “Aerion has served our scheme well over many years. Moving away from in-house asset management has been a difficult strategic decision for the trustees. However, the increasing maturity of the scheme and evolution to our investment strategy meant it was a carefully considered decision that we could not avoid making.”