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Goldman Sachs: The Record-Breaking £23bn Deal Explained

Goldman Sachs Asset Management has been chosen to manage about £23bn in assets for the BAE Systems Pension Scheme and BAE Systems Executive Pension Scheme in the UK. The assets will still be managed by the in-house team, which will join GSAM as part of an outsourced chief investment officer deal.

Goldman Sachs Asset Management to manage £23bn in UK assets as part of an outsourced chief investment officer deal. Photo: Adam Lee/Alamy

The transition is expected to be completed at the end of 2023. GSAM said that the trustees will continue to benefit from the existing in-house team, while enjoying the global investment capabilities of Goldman Sachs across public and private markets.

The deal will improve scale and efficiency, leading to improved performance and lower costs. The agreement marks the largest outsourced chief investment officer appointment in the UK to date.

Andrew Gallagher, Chair of Trustees of the BAE Systems Pension Scheme and BAE Systems Executive Pension Scheme, hailed the appointment and attached great importance to the in-house expertise and the global capabilities of Goldman Sachs, expressing his intention to continue delivering long-term value to scheme members.

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The move comes as part of BAE Systems’ efforts to reduce pension risk and improve investment efficiency without losing flexibility.

The appointment will consolidate Goldman Sachs’ position as one of the largest outsourced chief investment officer managers in the UK.

The asset manager will supervise over £200bn of assets.

The OCIO model has been gaining momentum among pension funds in recent years as they seek to enhance performance, improve governance, and lower costs. The OCIO market has seen numerous significant deals in recent years.

For instance, BlackRock was awarded a £21.5bn contract by BA Pensions in June 2021, while National Grid UK Pension Scheme appointed Russell Investments to an OCIO mandate worth £13bn.

Schroders Solutions was entrusted with significant pension funds under management by Centrica, while Royal Mail Pension Plan hired BlackRock for an £8.8bn OCIO brief.

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In February 2022, The Northumbrian Water Pension Scheme awarded an OCIO mandate to Cardano to design and implement a strategic asset allocation plan.

This appointment reinforces the ongoing trend of large pension funds outsourcing portfolio management to external firms, creating opportunities to improve performance, while simultaneously enhancing governance. In summary, the decision by BAE Systems to entrust Goldman Sachs Asset Management with the OCIO management of the BAE Systems Pension Scheme and BAE Systems Executive Pension Scheme is a substantial development in the OCIO market and is expected to benefit all parties involved.

To get in contact with feedback on this article please email us at publishing@krugmaninsights.com 

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