CVC takes stake in PIC

Pension Investment Corporation, which was founded by Edi and Danny Truell and backed by JC Flowers, will be the third asset in CVC’s longer-hold Strategic Opportunities platform.

CVC Capital Partners is acquiring shares held by several investors in Pension Insurance Corporation, the pension schemes insurer set up by Edi and Danny Truell in 2006.

CVC is acquiring between 10 and 20 percent of PIC in a deal valuing the business at around £2 billion ($2.5 billion; €2.35 billion).

The firm will acquire the stakes using capital from its Strategic Opportunities platform, its longer-term investment vehicle which targets mid-teens returns and expects to hold business for between eight and 12 years.

This is the third investment the platform has made, following the acquisition of a 40 percent stake in UK motorway service provider Moto from UK-based Universities Superannuation Scheme and the acquisition of The Carlyle Group’s stake in roadside assistance company the Royal Automobile Club, both in December 2015.

PIC is a specialist insurer and leading provider of bulk annuities to UK corporate pension schemes and counts the Cadbury Pension Fund, the London Stock Exchange Pension Scheme, and the Alliance UniChem UK Group Pension Scheme among its clients.

“There is growing demand from companies in the UK to remove the financial and operational risks related to their defined benefit pension obligations,” Peter Rutland, partner and global co-head of the financial services team at CVC, said in a statement.

“PIC has already demonstrated its industry-leading ability to respond to this trend, providing its customers with long-term stability and financial security.”

PIC’s CEO Tracy Blackwell said in a statement that the addition of CVC as a shareholder is “an entirely positive development” for the business.

“The combination of their financial services expertise and long-term, strategic financial support is important to us as we continue to meet the demand for securing pension obligations in the UK’s established and expanding pension insurance market,” Blackwell said.

As at 30 June 2016 PIC had £18.4 billion in financial assets, securing the benefits of more than 130,000 individuals. It is understood that the majority is invested in fixed income assets, and PIC has no exposure to private equity.

According to media reports, as part of the transaction Edi Truell’s Disruptive Capital Finance will invest a further £25 million, upping its stake to 2.5 percent. It is unclear whether DCF will be using its freshly-raised £80 million third-party “top-up” fund to fund the investment. Truell stepped down from PIC’s board in 2012.

Disruptive Capital did not respond to a request for comment by press time.

Speaking on a panel on evolving fund strategies at the BVCA Summit 2016 in October, CVC investor relations partner Marc St John said that following the global financial crisis there was a diminishing in the number of GPs that could manage LPs’ capital, and then an “explosion” of capital that needed to be managed, a “dichotomy” which gave rise to the Strategic Opportunities Fund.

“An investor comes to us and says ‘look, I’ve got more capital than I know what to do with and I can’t find enough good managers, can you do something with this?’”

The Strategic Opportunities Fund is around $4.5 billion and was raised from five LPs. It is understood the vehicle will make fewer investments than a typical CVC buyout fund.

“That gives you a sense of how much capital’s out there,” St John said. “We raised the cap twice and we still had people knocking on the door.”

St John said he is often asked whether CVC has “unleashed Frankenstein”, and whether the strategic opportunities strategy is going to “devour” the firm’s other programmes.

“The answer is I don’t know.”