While many in the City of London are fretting about a lack of inward investment, there’s one British financial product that North Americans can’t get enough of: pensions. A group affiliated with Apollo Global Management recently paid 5.7 billion pounds ($7.5 billion) for a leading player in the market for taking over retirement schemes. An arm of Canada’s sprawling Brookfield Corporation on Thursday agreed a 2.4-billion-pound deal for another, Just Group. There’s sound logic behind the seemingly manic rush.\n\nThe backdrop is that many UK employers, having largely closed their historic defined-benefit pension schemes, are sitting on over 1 trillion pounds of retirement obligations and corresponding financial assets. Managing these schemes is costly and not the core competence for most companies, prompting them to outsource the job to specialists. Some of the leading players in this red-hot “pension risk transfer” market include insurer Legal & General, privately held Rothesay, Just Group and Pension Insurance Corporation (PIC), the business that Apollo’s European partner Athora bought four weeks ago.\n\nBrookfield is paying a high price. Its cash offer implies a 75% premium above Wednesday’s closing level and is equal to 1.1 times a key measure of the target’s equity. That compares with a roughly equivalent valuation multiple of around 1.05 in the recent Apollo-linked PIC deal, which itself looked steep. Analysts reckon Just Group will produce almost 140 million pounds of earnings in 2027, according to forecasts gathered by Visible Alpha. That would imply a humdrum 6% return on investment for Brookfield Wealth Solutions – the unit of Bruce Flatt’s wider empire that is doing the deal, and which has hitherto focused on the racy U.S. retail annuity market.\n\nThere are two main ways Flatt’s insurance team can juice the return. The first is to steer Just Group’s existing investments into better opportunities. Private assets – mostly mortgages, infrastructure and real-estate debt – accounted for 45% of the company’s 27-billion-pound asset portfolio at the end of last year. Increasing that percentage is not the plan, according to a person familiar with the matter, since doing so could increase capital requirements. But one of the world’s biggest asset managers should be able to find more lucrative opportunities than a middling UK player like Just Group, for example data centres or renewable power investments. The same goes for Apollo vis-à-vis PIC.\n\nSecond, both giants have the capital to keep funding future growth, which seems necessary since employers are outsourcing tens of billions of pounds in retirement liabilities each year. Stumping up the equity for new deals will be easier for a large player like Brookfield than a mid-sized publicly listed group, enabling faster growth. About 80% of Britain’s defined-benefit pensions were yet to be outsourced as of December 2024, according to a Just Group presentation. That means there’s room for more than one North American giant to flourish.

Apollo-Brookfield UK pension race has two winners

Apollo Global Management and Brookfield Corporation have secured major deals in the UK pension risk transfer market, acquiring leading players in retirement scheme management. Apollo paid 5.7 billion pounds for a key pension firm, while Brookfield paid 2.4 billion pounds for Just Group. The deals reflect the UK's growing need to outsource retirement obligations, with valuations reflecting high premiums and growth potential in private assets and renewable energy opportunities.