Investment

BT’s £39bn pension fund cuts UK investments in blow to Hunt’s Big Bang 2.0 ambitions

Published

1 year ago

June 19, 2023

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.

The BT scheme is the largest on London’s blue-chip FTSE 100 index, with around 270,000 members.

The pension fund’s decision to reduce its holdings of British equities is a blow to the Chancellor’s ambitions to trigger a new “Big Bang” in the City by encouraging retirement savings managers to invest in the UK.

Mr Hunt has committed to a series of banking reforms that are intended to slash red tape and have attracted comparisons with Margaret Thatcher’s overhaul of the Square Mile.

The failure of BT’s pension fund to back Britain also drew condemnation from Baroness Ros Altmann, former pensions minister.

Former pensions minister Baroness Altmann said it was an outrage that the fund was not supporting the UK economy

Credit: Jonathan Brady/PA Wire

Baroness Altmann said: “It’s an outrage that a major pension fund, especially one underpinned to some degree by the Government and funded to a significant degree by taxpayer money, is not supporting the British economy.

“If you don’t have domestic sources of long-term funding supporting your own economy, then however much you believe you’re going to get a better return from investing overseas, you are impoverishing your own domestic base and therefore your members are going to have a poorer retirement because they’ll be living in a poorer country.”

Nick Delfas, an analyst at Redburn, said BT’s paltry domestic holdings “jumped out” and urged policymakers to take note.

Baroness Altmann called on MPs to do more to encourage pension funds to invest in Britain, saying it was crucial to economic growth.

She added: “I just think we’ve lost the plot a little bit on what a pension fund is meant to achieve… it’s about time we helped pension funds understand that there is a responsibility that goes along with getting tax relief.”

A spokesman said the BT pension scheme was reducing its exposure to equities as part of a de-risking strategy. The scheme is highly mature, with an average member age of 68.

The scheme’s overseas equities have also suffered heavy losses, tumbling 75pc to £1.7bn.

Nevertheless, the small proportion of UK stocks held by the fund highlights the FTSE 100’s waning status among global rivals. Last year, Paris leapfrogged London to steal the crown as Europe’s largest stock market.

John Ralfe, a pensions expert, said: “The truth is, the UK is a small stock market.”

The 66pc reduction in UK stocks held by BT’s retirement fund is understood to be partly linked to the chaos in financial markets that struck last September.

A sharp fall in government bond values in the aftermath of Liz Truss’s mini-budget triggered margin calls on products called liability driven investments (LDI), which are popular with pension funds.

The Bank of England was forced to make a dramatic £65bn intervention to mitigate the crisis, which forced many pension funds to rapidly sell assets to meet margin calls.

BT’s pension fund suffered an estimated £11bn drop in the value of its assets as a result of the crisis and is down almost £15bn since 2022.

Analysts also raised concerns about the high proportion of illiquid assets held by the BT pension scheme. Following last year’s sell-off, just 65pc of the scheme’s asset base is quoted, according to Redburn.

Illiquid assets are considered riskier as they are harder to sell, while it is also more difficult to establish a value.

The revelations come just days before the work and pensions select committee is due to begin an inquiry into defined benefit pension schemes amid concerns last year’s crisis exposed weaknesses in governance and regulation.

Wyn Francis, chief investment officer of Brightwell which manages the BT pension scheme, said: “The BT Pension Scheme is a major investor in the UK with 64pc of its total assets invested in UK gilts, corporate bonds, property, public equities, infrastructure and private equity.

“As a mature pension scheme, it is on a de-risking path so the allocation to equities has been steadily reducing for a number of years.

“Offsetting this, the scheme has been growing its exposure to the UK through investments in corporate credit, direct lending, infrastructure and income generating property.”

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Investment

Tesla shares soar more than 14% as Trump win is seen boosting Elon Musk’s electric vehicle company

Published

7 days ago

November 6, 2024

Anne Joseph

NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.

Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.

“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”

Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.

Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.

Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.

Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.

In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.

The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.

And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.

Tesla began selling the software, which is called “Full Self-Driving,” nine years ago. But there are doubts about its reliability.

The stock is now showing a 16.1% gain for the year after rising the past two days.

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Investment

S&P/TSX composite up more than 100 points, U.S. stock markets mixed

Published

4 weeks ago

October 16, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.

The S&P/TSX composite index was up 103.40 points at 24,542.48.

In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.

The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.

The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.

The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.

This report by The Canadian Press was first published Oct. 16, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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Economy

S&P/TSX up more than 200 points, U.S. markets also higher

Published

1 month ago

October 11, 2024

Anne Joseph

TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.

The S&P/TSX composite index was up 205.86 points at 24,508.12.

In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.

The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.

The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.

The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.

This report by The Canadian Press was first published Oct. 11, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

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