The trustees of the BAE Systems Pension Scheme and BAE Systems Executive Pension Scheme have appointed Goldman Sachs Asset Management to manage around £23bn in UK defined benefit (DB) pension scheme assets.

The appointment, which followed a highly competitive tender process, marks the largest Outsourced Chief Investment Officer (OCIO) mandate in the UK to date.

It is expected to deliver performance and cost benefits for the schemes through the greater scale and efficiency.

Redington and Travers Smith advised the scheme trustees on the appointment, while the sponsoring employer, BAE Systems, received advice from PwC.

Redington, which has been strategic investment adviser to the trustees since 2021, will now work with the schemes and GSAM to oversee the implementation of the agreed strategy and ongoing relationship.

As part of this, the BAE Systems’ in-house investment management team will join Goldman Sachs Asset Management and continue to provide investment services to the schemes.

This approach aims to offer continuity for the trustees, who will benefit from the global investment capabilities of Goldman Sachs across public and private markets, whilst maintaining the expertise of the existing in-house team.

It is expected that the asset management and team transition to Goldman Sachs Asset Management will take place towards the end of 2023.

Commenting on the appointment, BAE Systems Pension Scheme and BAE Systems Executive Pension Scheme chair of trustees, Andrew Gallagher, stated: “We are delighted that this agreement with Goldman Sachs Asset Management brings together both the expertise of our in-house team and the full capabilities of Goldman Sachs and we look forward to working together to continue to provide long-term value for our members.

“Implementing this change was critical to future-proofing our investment management capabilities and it was a substantial undertaking.

“The trustees benefited from all our advisers' deep understanding of our needs, expertise and unparalleled knowledge of this market to help us reach this agreement.”

Goldman Sachs chief executive officer, David Solomon, added: “We are proud to partner with BAE Systems and the trustees to deliver this long-term solution, which brings the full capabilities of Goldman Sachs to the benefit of BAE Systems’ Pension Schemes.”

Adding to this, BAE Systems group financial director, Brad Greve, stated: “Through proactive actions of BAE Systems, in our role as scheme sponsor, the trustees and the excellent work of our in-house investment management team, the pension funding level has moved from a significant deficit to a surplus.

“As we continue to look at ways to further de-risk pension liabilities, reducing the cost and improving the efficiency of asset management are essential.

“Goldman Sachs Asset Management will offer both and we’re pleased that our in-house team will have access to the broader career paths available within such a global leader.

“This move doesn’t limit BAE Systems’ flexibility in exploring further ways of reducing our pension risk and we’ll continue to be dynamic in managing this risk going forward.”

Redington head of DB consulting team, Carolyn Schuster-Woldan, also highlighted the scheme’s unique approach, engaged sponsor and collaborative approach as having played a “crucial role” in its successful outcome.

“Along with our OCIO advisory team, we’re delighted to have advised the trustees throughout this process,” she stated.

“We look forward to continuing to work together to help provide financial security for the schemes’ 185,000 members.”

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