Railpen improves insight into the performance and attribution of scheme assets through the integration of private markets data.
The Railways Pension Scheme is one of the UK’s largest and longest established pension funds. Railpen is responsible for the safekeeping and investment of circa £37 billion on behalf of the scheme’s c.350,000 members who are connected to the railway industry.
Railpen's purpose is to “secure our members' future”. To achieve this, it invests the scheme’s assets to generate appropriate returns over the long term across various asset classes, including private assets - private equity, private debt and infrastructure, and account for more than 20 % of their AUM.
However, it is challenging to evaluate scheme-wide returns when assessing a portfolio containing both public and private assets. For example, public assets are typically measured using time-weighted returns, whereas private assets apply money-weighted returns. The performance attribution analysis used to evaluate returns and investment decisions also differ significantly between public and private assets. Railpen follows a “Best-of-breed” approach for each asset class. It uses PEARL for data and analytics for public markets and Burgiss for private markets. Leveraging Burgiss as a data source has already solved a major challenge related to the timing of the private assets’ valuations.
Railpen’s remaining challenge was to come to a solution that combined both public and private markets data and analytics to enable them to analyze their total portfolio.
How Railpen solved this challenge
Railpen overcame the challenge by combining forces with Burgiss and Ortec Finance who worked on integrating both their solutions. Burgiss provides detailed private market data for all Railpen’s commitments across private asset classes including daily cashflows, quarterly valuations, unfunded commitment obligations and distribution and call amounts. Furthermore, Burgiss offered a full -through into the holdings of the underlying managers and enhanced this with company-level characteristics such as industry, country of principal operations, currency - more than 100 underlying company data points and KPIs. The interface between the two solutions is fully automated and drives efficient operational processes.
Railpen can now utilize the full suite of analytics available in PEARL informed with Burgiss private capital data. PEARL is Ortec Finance’s leading solution for performance measurement, attribution, ex post risk and GIPS composites. It offers an extensive range of performance and risk metrics for any asset class, including privately held assets. Our sophisticated attribution models capture the added value of any investment decision made, including dynamic asset allocations, currency hedging and overlay programs.
With the integration of the Burgiss solution, Railpen can now accurately quantify how private assets add value to the total portfolio. It also has access to deeper insights in the private investments themselves by using a variety of private asset metrics available from Burgiss.
The joint solution allowed Railpen to take a holistic view of investments across multiple asset classes. The integration allows them to seamlessly include private assets within the overall portfolio performance analysis and easily drill down to the contribution of the individual investment. Furthermore, Railpen can now deep dive into their target allocations and quantify how their active decisions to deviate from the target affected the overall performance, including the effect from illiquid asset classes. With these additional insights, Railpen can significantly improve both its monitoring and investment management processes.
Paul Farrar, Head of Investment Analytics at Railpen: “The collaboration between Ortec and Burgiss provides a holistic analysis across multiple asset classes, and a simplified Operating model for combining two of our key data sets. Through this partnership we are provided with a single, optimized dataset readily retrievable through established data flows. This helps us have a clear understanding of the value of assets individually and collectively and informs the decisions we take on behalf of the members we serve.”
The integration of Burgiss data into PEARL is not only beneficial from an analytical perspective but also really helped the workflow at Railpen. All information is now accessible from a single system and all teams across the investment operation have access to the same data.