One of Britain’s largest pension schemes has slashed its holding of UK stocks in a blow to Jeremy Hunt’s hopes of triggering a ‘Big Bang 2.0’.
BT’s £39bn pension fund has cut back its exposure of London-listed stocks to just £100m – or 0.3pc of assets – new figures have revealed. Investment has fallen from £300m last year and £3.6bn in 2010.
Maute?
I assume “Big Bang 2.0” is some sort of disgusting SW1 foam party.
Imagine looking at the sneering, ratlike face of Jeremy Hunt and thinking “yeah… THAT’S the little weasel I want making decisions about my money”.
Not gonna happen, is it?
Obviously it wouldn’t be unwise to point out the impacts of interest rate rises on the solvency of pension funds
@ Diogenes
The impact of a rise in interest rates depends on the nature of the Fund’s portfolio of investments but significantly more so on its (non-investment) cash flow profile. A “mature” fund with negative (or negligible) cash flow that has switched into fixed interest securities “to reduce risk” will be hurt by a rise in interest rates; a “young” and growing fund will be helped by a rise in intertest rates.
There are other alternatives but my message is that “it all depends…”
If you read the article carefully, you may conclude that the real story is something else. The UK assets have fallen by 66%, but forther down it says “The scheme’s overseas equities have also suffered heavy losses, tumbling 75pc to £1.7bn.”. It seems to me that 66% is less than 75%, so in the face of huge losses, the UK proportion has actually grown. We find out that the £39bn fund is “down almost £15bn since 2022”, so it is completely unreasonable to expect that its UK assets would be miraculously untouched, or that it would move investments to maintain a fixed level of UK assets in the face of general loss as that would make the portfolio irresponsibly unbalanced.
When you read that a fund has cut investments in the UK, this should provoke an immediate question of what they did with the money.
Forgive my ignorance, but how does the BT pension fund buying UK listed shares ‘invest in the UK economy’? They buy some shares from someone else who owns them. No investment in the underlying company is done. I suppose if the fund buys a UK listed share and it has a rights issue that they take up, then that would be new investment into the actual business. But thats not whats being suggested. So what exactly do they mean?
@Jim
That’s what “invest” means. For example, if you invest in property, you might pay towards building a new house, but you’re just as much investing if you buy an existing one and if you buy BT shares, you’re investing in BT regardless of whether you bought shares already owned by someone else. To invest in the UK economy does not mean to spend money for the benefit of the UK economy – unless you’re a politician and trying to justify spending money by falsely saying it’s an investment.