Lifetime Achievement 2017

Alan Rubenstein

The Pensions Protector

Alan Rubenstein has a long and distinguished career serving the pensions industry on both the sell and buy sides. As he prepares to step down as chief executive at the UK’s Pension Protection Fund (PPF), IPE takes a look back at his many positions in the industry, with particular focus on his achievements at the PPF.
Rubenstein qualified as an actuary with Scottish Widows before moving into senior executive positions with BZW Asset Management, Lucas Varity Fund Management, Morgan Stanley and Lehman Brothers. He is also a former chairman of the investment council of the UK’s National Association of Pension Funds as well as former vice-chairman of the body as a whole. Rubenstein acts as an investment adviser to the British Coal Staff Superannuation Scheme and has sat on the supervisory board of Dutch financial services group Robeco and the UK’s Institute and Faculty of Actuaries.
The PPF was set up by the British government in 2004 and acts as a lifeboat fund by taking over the defined benefit plans whose sponsors have gone into administration and which have insufficient funds to maintain a minimum level of solvency.
Rubenstein took over as chief executive in 2009. At the time he took office, the PPF’s assets under management stood at £2.9bn (€3.3bn). Today it is practically 10 times that value at £28.7bn. This is equivalent to an overall funding ratio of 121.6% and the scheme is well on the way to meeting its objective to be fully self-sufficient by 2030, without the need to rely on the levy it currently charges eligible schemes. This is very much part of Rubenstein’s legacy and it is thanks to a long-term low-risk liabilitydriven investment strategy and objective to bring the scheme’s asset management in-house.
Internal investment management has been a key aspect of the fund that Rubenstein has driven. By 2017, it had completed the first two phases of the project. Internal asset management teams give the PPF greater control over its investments and costs. The next phase will bring the management of its private and listed credit portfolio in-house and examine the rationale behind insourcing its currency hedging.
The primary objective of the fund’s investment strategy is to ensure it has enough reserves to pay the pensions of those members who have transferred to it and any potential new members. To achieve this, it has designed a bespoke liability-driven investment strategy that targets an expected outperformance over the liability benchmark of 1.8% per annum. This is within a tracking error relative to the liabilities of between 3% and 4.5% annually. Cash and bonds make up by far the largest portion of its strategic allocation, supported by a healthy alternatives portfolio and lesser exposures to equities and hybrid assets comprising illiquid assets with hedging characteristics. This is supplemented by a special overlay portfolio consisting of swaps, bonds to ensure the PPF continually matches its liabilities. Tactical adjustments are also permitted within the scheme’s market risk target range of 3.5% to 5%.
The strategy differs fundamentally from regular DB schemes in that it must remain relatively uncorrelated to the funding levels of the schemes it protects since the PPF needs to be solvent at times when general pension schemes are significantly underfunded.
The PPF undertakes a special review every three years and 2017 marks the last review Rubenstein oversaw. But, as he steps down, he leaves the PPF in excellent health, even when potential extra liabilities it might need to assume are taken into consideration. The reviews set out the PFF’s vision for that period and its progress towards its longterm target to be self-sufficient by 2030.
Editor's comment:
“Alan Rubenstein’s long career in asset management and pensions investment has helped shaped the industry, especially liability-driven strategies”
  • Long career in asset and pensions investment industries
  • Chief executive of PPF from 2009–18
  • Oversaw ten-fold increase in PPF asset value to current €33bn
  • Implemented project to bring asset management in-house
  • Self-sufficiency objective for the PPF by 2030 based on a low-risk liability-driven investment strategy