Dynamic de-risking puts car dealer in driving seat to full funding

A fiduciary management roadmap

A 150-year-old business that switched from manufacturing cars to selling them was seeking urgently to improve the returns its £80m defined benefit pension scheme could generate to repair a worsening deficit.

Trustees were concerned by mushrooming liabilities which threatened to undermine the covenant. At one point, they were six times the size of the corporate balance sheet.

After a competitive tender, SEI created a fiduciary management road map to reach full funding by the end of the decade.

How refining investment improved performance

The client selected liability-driven investment as the key strategy to offset the risk the scheme liabilities posed to its covenant. Trustees had previously relied on the conventional consulting model and approved replacing existing diversified growth and index tracker funds not only with more sophisticated methods but with increased hedging to minimise risk.

Given the deficit had ballooned by £10m to £20m between 2014-16, this decision boosted returns and increased efficiency in service of the aim to secure the scheme’s self-sufficiency.

A key reason trustees enabled this approach was the mandate to act dynamically to de-risk. This meant SEI’s team were not tied to trigger points with the flexibility to change direction and adjust time frames in the best interests of the client.

On the right road

With current returns, at July 2022, at gilts plus 2.7 per cent, the client is on course to reach technical provision levels before progressing to full funding.

Important information 

This document contains marketing material about our fiduciary management service. This document does not represent impartial advice on this service. In certain cases, you are required to conduct a competitive tender process prior to appointing a fiduciary manager. Guidance on running a tender process is available from the Pensions Regulator.

This is a marketing communication. 

This webpage is issued and approved by SEI Investments (Europe) Ltd (“SIEL”) 1st Floor, Alphabeta, 14-18 Finsbury Square, London EC2A 1BR. This webpage and its contents are directed only at persons who have been categorised by SIEL as a Professional Client, for the purposes of the FCA Conduct of Business Sourcebook. SIEL is authorised and regulated by the Financial Conduct Authority. SEI Investments (Europe) Ltd ("SIEL") is the distributor of the SEI Irish UCITS Funds (“Funds”) and also serves an investment manager and/or fiduciary manager for clients who invest all or a portion of their assets in such Funds. SIEL provides the distribution and placing agency services to the Funds by appointment from its associate, the manager of the Funds, namely SEI Investments Global, Limited, a company incorporated in Ireland (“Manager”). The Manager has in turn appointed another associate, as investment adviser to the Funds, namely SEI Investments Management Corporation ("SIMC"), a US corporation organised under the laws of Delaware and overseen by the US federal securities regulator. SIMC provides investment management and advisory services to the Funds. Any reference in this webpage to any SEI Funds should not be construed as a recommendation to buy or sell these securities or to engage in any related investment management services. Recipients of this information who intend to apply for shares in any SEI Fund are reminded that any such application must be made solely on the basis of the information contained in the Prospectus (which includes a schedule of fees and charges and maximum commission available).Commissions and incentives may be paid and if so, would be included in the overall costs. Please refer to our latest Prospectus (which includes information in relation to the use of derivatives and the risks associated with the use of derivative instruments), Key Investor Information Document, Summary of UCITS Shareholder rights (which includes a summary of the rights that shareholders of our funds have) and the latest Annual or Semi-Annual Reports for more information on our funds, which can be located at Fund Documents (https://seic.com/en-gb/fund-documents). And you should read the terms and conditions contained in the Prospectus (including the risk factors) before making any investment decision. While considerable care has been taken to ensure the information contained within this webpage is accurate and up-to-date and complies with relevant legislation and regulations, no warranty is given and no representation is made as to the accuracy or completeness of any information and no liability is accepted for any errors or omissions in such information or any action taken on the basis of this information. You should read all the investment information and details on the funds before making investment choices. If you are in any doubt about whether or how to invest, you should seek independent advice before making any decisions. Past performance does not predict future returns. Investments in SEI funds are generally medium to long-term investments. The value of an investment and any income from it can go down as well as up. Investors may not get back the original amount invested.