Interview – HSBC Pension Scheme
INTERVIEW – BRIAN KILPATRICK “Change is happening.”
The chief investment officer of the HSBC Pension Scheme talks to Mona Dohle about illiquids, non-traditional indexes, data scarcity, setting a path towards net zero and getting to grips with climate disclosures.
How have your first two years at the HSBC Pension Scheme been? It was interesting joining during lock- down because you do not get to meet the people you work with in a real life face-to- face basis. But it has been a busy time. HSBC is a big UK scheme and there is a lot going on. When joining a new organisation, there is always certain stuff you have to learn. For example, publishing the annual TCFD [Task Force on Climate-related Financial Disclosures] statement is quite an oner- ous task that is completely new to me. I was previously a pensions director at Santander UK and that helped me pre- pare for this role. It helped me under- stand the peculiarities of bank govern- ance and oversight of pension schemes within a banking organisation, given the implications for bank capital if a pension
12 | portfolio institutional | May 2022 | issue 113
scheme is in actuarial deficit or a near breakeven position.
In terms of the bank itself, HSBC is a great place to be. It is a global bank with lots of good people, a great trustee board and lots of interesting stuff to do. So, the past two years have gone by quickly.
As chief investment officer, you are re- sponsible for the day-to-day oversight of the investment strategy for the defined benefit (DB) and defined contribution (DC) sections. Do these strategies overlap? We don’t talk of them as sections because they are not sections but DB and DC assets. The DB scheme is closed, so the existing employed members continue to save for their retirement through the DC scheme. So, depending on how long you have worked with us, you could have a DB and DC pension.
Fundamentally, the same underlying phi- losophy and performance strategies guide the investment strategy. That includes issues such as a belief in diversification, the persistence of smart beta strategies and a focus on ESG risk mitigation, including climate risk. But given the different profiles of DB and DC assets, there are differences in strategy.
The DB scheme sits on a healthy surplus. How does that impact your investment strategy? What does your asset allocation look like?
The DB scheme is well funded, so that plan is largely de-risked in terms of its asset allocation. Its assets are typically a mixture of high-quality credit and govern- ment securities with a small allocation to illiquid assets.
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