BT fund to invest in distressed debt

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The Independent Online

The pension fund of telecoms giant BT is preparing to invest in distressed debt instruments.

The scheme is expected to increase its allocation to a credit portfolio it set up last year. Hermes Pension Fund Management, which manages BT's scheme, already has 3 per cent of its assets allocated to the portfolio and believes the strategy will bring "powerful returns".

BT said in the pension fund's annual report that the value had fallen from £39.6bn at the start of 2008 to £31.3bn. It said: "The substantial financial and economic problems worldwide, and the resultant severe falls in global financial markets caused a 17.5 per cent negative overall investment return in the scheme's assets during the year."

The group reported the fund's deficit doubled to £5.8bn in the three months to June because of the higher inflation rate. BT is paying £525m into the fund for the next three years and is in talks with the regulator over the triennial review of its pension scheme.