What happened
Davidson Kempner Capital Management is backing Genwood, which was incorporated earlier this year and has added Tom Ground and Kunal Sood - both formerly at Standard Life Plc - to its board. The expectation is that Genwood will operate as a superfund platform, taking on company pension plans and supporting them with outside capital.
Genwood hasn't detailed its strategy in public and is absent from the UK Pension Regulator's roster of superfunds that have completed assessment. A Davidson Kempner representative declined to comment.
Why it matters for the market
Alternative asset managers want exposure to UK corporate pension obligations, a market long led by life insurers. In 2023, platforms supported by Brookfield Corp. and Apollo Global Management Inc. announced $10.7 billion of acquisitions as they entered the arena.
Orca is another superfund consolidator aiming to take over UK pensions. Orca representatives did not promptly reply to a request for comment.
Other routes into pension risk
Both insurers and asset managers are targeting the UK's small but better funded defined-benefit schemes, helped by a government-backed consolidation push. While most companies no longer offer these pensions, millions still have current or future benefits, and funding has improved with the lift from higher interest rates. The basic bet for both insurers and superfunds is that they can earn more on the assets than it costs to pay pensions, while supplying the capital that underwrites those promises.
Superfund executives say their approach could ultimately handle around £500 billion of liabilities out of more than £1 trillion in corporate defined-benefit obligations. The Pension Protection Fund counts roughly 4,838 defined-benefit schemes that have yet to transact. Earlier this month, TPT Retirement Solutions reported clearing the regulator's assessment and securing backing to commence deals totaling between £1 billion and £1.5 billion. Clara Pensions, owned by Sixth Street, completed the assessment first in 2021 and has subsequently closed seven transactions covering upwards of 23,500 members and £1.6 billion in assets.
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Asset managers are also exploring sponsor swaps - an alternative to bulk purchase annuities. Under this arrangement, a third party steps in for the original corporate backer, takes on the funding obligation and usually oversees the assets, while the plan carries on independently. Aberdeen Group Plc employed this approach last year to assume sponsorship of Stagecoach's £1.2 billion ($1.6 billion) pension.
Other UK schemes have solicited pitches for similar moves, and people familiar with the matter said that both the asset-management division of Goldman Sachs Group Inc. and Nuveen-owned Schroders are evaluating comparable approaches. A Schroders spokesperson said sponsor swaps are "an area that Schroders has been actively working with corporate sponsors and trustees drawing on our investment capabilities in this space and the experience of Schroders' own pension scheme, which is running-on for surplus sharing." A Goldman Sachs representative declined to comment.
The investor take
More capital is lining up behind UK pension consolidation, widening the field beyond insurers to superfunds and sponsor swaps. If superfunds capture even a slice of the estimated £500 billion opportunity, expect more hiring, fundraising and transactions across managers and insurers positioning for long dated pension cash flows - and a growing roster of public companies with UK retirement exposure.
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