Case Study: Corporate Sole Trustee for nimble decision-making
LawDeb was appointed as corporate sole trustee (CST) of the scheme of a leading insurance broking firm in 2014 having previously acted as co-trustee. The Scheme has around £200m in assets and 600 members and is aiming for full funding on a self-sufficiency basis of gilts + 0.30% in the longer term.
In March 2020 there was a significant fall in equity markets due to the onset of the Covid-19 pandemic. This resulted in the Scheme becoming underweight its strategic allocation to return-seeking assets and provided an opportunity to rebalance at an attractive entry point.
Timeline of events and actions taken – March 2020
13th March 2020 (Friday)
- The investment adviser, LCP, called LawDeb to propose rebalancing back to the strategic allocation by purchasing equities.
- As Corporate Sole Trustee (CST) LawDeb followed its governance framework to evaluate and implement the proposal from LCP. This involved the two trustee directors responsible for the Scheme considering the proposal and confirming their agreement in principle to proceed.
- Once LawDeb had agreed the proposal in principle, LCP provided their advice in writing together with transfer instructions. This was done on the same day with the recommendation being to invest £3.5m in equities using assets in the liquidity fund. This fund is maintained for collateral and to give the Trustee the flexibility to make exactly this type of investment.
16th March 2020 (Monday)
- The two trustee directors executed a trust committee written resolution to confirm and evidence the Trustee’s approval to the trade and then executed and returned the requisite transfer instructions to the investment manager, LGIM.
- This was done in advance of LGIM’s midday cut-off point so that the decision to rebalance and its implementation was effectively achieved within one business day.
Timeline of events and actions taken – February 2021
16th February 2021
- LCP called LawDeb to advise that, as a result of outperformance of equities since March 2020, the Scheme was now overweight its strategic allocation to equities. LCP therefore recommended that LawDeb take the opportunity to rebalance back to the strategic benchmark by selling down equities.
- The two LawDeb directors responsible for the Scheme reviewed and agreed the recommendation, once again following the governance framework in place for all CST decision-making.
17th February 2021
- LCP provided the advice in writing with the appropriate transfer instructions to implement the trade.
18th February 2021
- LawDeb signed and returned the transfer instructions, having executed a trust committee written resolution to confirm and evidence the Trustee’s approval of the trade.
- This took place before LGIM’s midday cut-off point with meant that the decision and its implementation were again achieved in very short order, this time within two business days.
“As CST we are generally able to react more swiftly than a traditional trustee board whilst maintaining robust governance practices at the same time. This has resulted in a good outcome for members as the funding level has improved and with it the security of members’ benefits. “Daniel Barlow – Lead director, representing LawDeb as CST
Overall, the Scheme is around 1% or c.£2m better funded as a result of these quick actions taken in response to market movements. This nimble decision-making was facilitated by the appointment of a CST with a highly responsive and yet robust governance framework and decision-making process in place.
To find out more contact Daniel Barlow who acts as CST for this client.
“As a result of the quick actions of the Trustee to consider our investment recommendations and sign the investment instructions in quick time, the pension scheme was able to opportunistically take advantage of market levels in a manner consistent with its long term investment strategy. The pension scheme was able to lock in a ~1% improvement in its funding level (or ~£2m) as a result of the Trustee’s actions.”Hishendhra Ravindra – Scheme Investment consultant - LCP