Large institutional asset managers have perhaps never quite seen the inexorable roll of DB pensions assets into the coffers of their insurer-owned counterparts as a direct threat, despite the rapid growth of the de-risking industry in the UK. But a report in the Financial Times suggests that this could be about to change.
A significant amount of resource and intellect has been applied into how best to solve this conundrum at a number of managers and the latest propositions typically represent an extension of cashflow matching technology, long duration credit assets and LDI strategies which can be closely aligned to one or more longevity swaps. These are typically aimed at schemes which are unable to enter into a full buy-out, but may be considering a partial buy-in offered by an insurance company. For one thing, an asset manager need not worry about the regulatory capital required by an insurer and its secondary constraints upon investing; secondly, managers argue that the buy-in process can have the affect of depleting the precious collateralised assets which can be used to support liability hedging.
Meanwhile, leading bulks insurers are responding with some pretty innovative product development initiatives in the 'buy-in light' category themselves. What all of these toolkits have in common is a requirement for high quality credit assets...