Money managers under the microscope
Where there’s muck…
Pensions schemes are in trouble, but those attempting to get them out the mire are seeing some money-spinning opportunities.
Corporate retirement funds that have promised to pay workers based on their final salaries have long been heading for difficulties as we humble drones have the temerity to live longer than anyone thought possible. Combine that with roller-coaster markets and unpredictable inflation and interest rate prospects and trustees start hunting around for a golden bullet.
For fund firms it might look a little dull. You kick off with a bit of low margin hedging here and there, relying on volume to turn a decent profit.
But increasingly the risk budget that these Liability-Driven Investment (LDI) strategies can take off the table can be put to work elsewhere — think active fixed income funds, equity derivatives or absolute return funds — to seek growth for the scheme and more margin for the fund firms involved.
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