Cardano, the pension advisory and investment management specialist, has been appointed to act as the outsourced chief investment officer (OCIO) for the Northumbrian Water Pension Scheme in the UK.
After a competitive tender process, the Trustee appointed Cardano to design and implement the £830m Scheme’s strategic asset allocation (SAA). The SAA will be consistent with return and risk management objectives set by the Trustee in consultation with the Scheme’s sponsor. WTW will continue to act as the Trustee’s investment consultant.
The SAA will evolve over time. It will initially be implemented using flexible building blocks, including: sustainable equities, investment grade corporate bonds, specialist active managers, several of the Scheme’s existing investments as well as government bond and inflation overlays.
Cardano will manage the Scheme’s liability hedging portfolio in-house on a segregated basis.
Sustainability will feature across the SAA. For example:
- The equity portfolio will incorporate a broad range of ESG considerations including but not limited to climate change e.g. the portfolio will aim to be water neutral by 2030
- The corporate bond portfolio will include sustainable and “green” bonds
- The specialist active managers will be held to account against a demanding ESG scoring system with targeted improvement milestones and key performance indicators
- The liability hedging portfolio will, in part, allocate transactions across counterparties based on Cardano’s assessment of investment banks’ sustainability
Duncan Willsher, a professional trustee at Vidett, the Scheme’s chair, comments:
“We are pleased to appoint Cardano. We wanted an OCIO who could offer a sophisticated strategy, flexible implementation and a collaborative approach to working with the Scheme’s stakeholders and other advisors. We look forward to getting started.”
Patrick Cunningham, Partner and Co-Head of Clients at Cardano, comments:
“We’re delighted by this assignment. Some schemes benefit from comprehensive fiduciary management services. Larger schemes with sophisticated governance models like this one are increasingly looking for OCIOs who can be flexible in the services they offer. We’re excited to join the Northumbrian Water Scheme’s team.”