Deutsche Bank and Eton Park International LLP are leading a consortium of backers for Mark Wood's new company Paternoster Limited, after announcing an investment of £500m of equity financing.
Once the financing has been completed, and Paternoster has received approval from the Financial Services Authority (FSA) as a regulated insurance company, Wood, the former chief executive of Prudential, plans to use Paternoster to offer tailored solutions to the £1,000bn defined benefit (DB) pension marketplace.
Paternoster says it will offer to buy the DB pension liabilities of UK companies and pension scheme trustees to free companies and trustees from the increasing risks of longevity, as well as investment risks in their pension funds.
It claims additional pressure on companies to manage deficits is being driven by the increased powers of the Pensions Regulator, and the introduction of the Pension Protection Fund.
As a result Paternoster believes there is growing demand for UK companies to remove DB pension obligations from their balance sheets, particularly as businesses are under increased pressure to disclose pension fund obligations in company accounts.
Non-executive directors of the new company will include Sir Howard Davies, former chairman of the FSA and director of the London School of Economics, Lord Leitch, a former chief executive of Zurich UK and Jeremy Goford, past president of the Institute of Actuaries.
Both Numis and Hawkpoint have been advising Paternoster on the formation of the company and the structuring of the fundraising, with Numis supporting the establishment of Paternoster and providing the initial venture capital funds. Numis has also acted as a broker for Paternoster in the fundraising and will continue to be a shareholder in the company going forward.
Wood, chief executive of Paternoster, says they are delighted to have successfully completed the fundraising and to have received such a positive market reception, adding the company believes the corporate DB pension market is one which has been historically overlooked and under-served.
He continues: “With an exclusive focus on this market, an experienced management team and the substantial financial backing we have received from our institutional partners, Paternoster is positioned to provide a much needed solution to UK companies, DB pension scheme trustees and to current and future DB pensioners.”
Anshu Jain, head of global markets and member of the group executive committee of Deutsche Bank, says this is an exciting opportunity for both the bank and Paternoster at an important point in the evolution of the UK pensions industry.
He adds: ”Pension fund trustees face ever-more complicated risk management questions and we’re committed to providing straightforward capital market solutions. This plays to our recognised strengths of client orientation and innovative solutions.”
Meanwhile, Erland Karlsson, chief executive of Eton Park International, adds it is enthusiastic about its involvement in the establishing of Paternoster, a financial services franchise with an emphasis on client service and a unique expertise in managing long-term pension risks.
He says: “This major investment extends Eton Park’s track record of identifying and supporting first-rate management teams with innovative perspectives on the insurance and financial services markets.”
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