Interview – National Grid
INTERVIEW – ROB SCHREUR
“Our approach is a bit like a satnav where you update a journey when you hit a traffic jam.”
The chief investment officer of National Grid’s pension scheme tells Mona Dohle about adapting to a constantly changing market environment and why the scheme does not rely on benchmarks.
You joined National Grid five years ago when the scheme was selling its in-house asset manager Aerion. How have those five years been? Good. It was a great time to join National Grid as it was setting up an investment team from scratch that would have a dif- ferent remit than Aerion.
Our core focus is risk management, asset liability management and investment strategy. We then select fund managers, much more so than Aerion did where the in-house management of assets was sup- plemented by external managers.
Why has National Grid divided its pension fund into sections?
The scheme was divided into sections in 2017 to reflect differences in sponsors and investment strategy. The sections are dif- ferent in terms of the sponsoring entities, the level of risk they are taking and where they
are on their journey towards
self-sufficiency. Whilst the governance has remained the same, there is one trustee board and one investment committee, all three sections are managed on a standalone basis with a tailor-made investment strategy.
18 | portfolio institutional October 2020 | issue 97
Does this focus on risk give you more flex- ibility in responding to market challenges? Whilst the three sections have their own strategy, and there are clearly differences in asset allocation, they are all managed in line with a process where we pay a lot of attention to asset liability risk and adjust the assets to match our long-term market views. About a year ago we decided to be under- weight equities, not because we expected Covid, but because we felt there was no requirement for us to take that risk. This has worked well for the scheme. We have been on this de-risking journey for the past few years and so were equity light when Covid kicked in.
You joined National Grid from Philips’ retirement fund, having previously worked at Dutch public sector pension fund ABP. Does your experience with these schemes shape your work at National Grid? Undoubtedly it does. At Phillips, we decided in 2005 to outsource our asset management division to BlackRock [then Merrill Lynch] and established a structure where the assets are managed externally by several managers. There was a team
employed by the trustees to focus on risk, investment strategy and manager selec- tion. Working with a small team enables a few things, one of them is informed, independent thinking. As a small team you should be aware of your limitations, so you try to structure an approach where you have access to experts in the field to inform your thinking.
Also, this might not come as a surprise but, being Dutch, we pay attention to costs. It is fair to say, compared to where the UK was back then, perhaps even where it is today, more attention was being paid to ESG and climate change. So, a focus on risk, a small team of inde- pendent thinkers, ESG and costs are things I have imported to the UK and are reflected in how we go about with our investments at National Grid.
You said you are underweight equities. Could you tell us more about the asset allocation in your portfolios? National Grid is a mature scheme. It is well funded and has been on a de-risking journey for a few years.
Our asset allocation differs by section. One has zero exposure to equities, the
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