EUROPE - Fortis Investments has unveiled a series of liability driven investment solutions targeted at small and medium sized pension funds in Europe.
Fortis is launching three LDI solutions: a basic swap solution, extra-long bond funds with durations of 15, 20 and 25 years respectively and a Leveraged Duration Solution which will enable pension funds to match their liabilities, whilst maintaining an active investment strategy.
Thomas Rostron, managing director and head of client service and business development at Fortis Investments, explained: “Basically if the client has 100 in terms of assets, in the case of the first solution, he will put this entire 100 into liabilities, but in the case of the Fortis Leveraged Duration Solution, he can put 50 into the fund, and retain 50 in cash.
The first 50 will be used to create an exposure of 100 through a nominal interest rate exposure in swaps and forwards or through buying bonds on a leveraged basis. With the 50 that he has, he can invest in absolute return products, equity or whatever else he wants to invest in.”
He added: “Unlike BGI or SSgA, we have come up with a number of solutions which will give clients a wider menu, so that they can choose a solution that is the right for their fund.”
The Fortis L Bond Extra-Long funds invested in durations of 15, 20 and 25 years are Euro denominated and offer pension funds an investment solution to match the duration of clients’ capabilities with the duration of their assets in order to minimise interest rate risk. The funds invest mainly in long-dated coupon and zero-coupon European Monetary Union government bonds.
“We are offering a number of building blocks for pension funds to create their portfolios and solve their ALM issues. In case of the extra long bond funds, we will work with the pension fund to understand the nature of their liabilities, to look at their duration and the size of their liabilities, their liability curve and then try to propose a combination of these funds plus our existing short-term bond funds to immunise the risk between assets and liabilities,” explained Rostron.
He added that while the extra-long bonds funds have already been launched, the leveraged duration solution would be rolled out in May.
Rostron said that Fortis was seeing an interest for LDI solutions in Germany, Belgium and France, while in the Netherlands, the manager had already rolled out the LDI solutions to its clients.
The Pensions Regulator (TPR) has granted 11 master trusts extensions to apply for authorisation, as it confirms it has received 22 applications ahead of the 31 March deadline.
Aegon Master Trust, Fidelity Master Trust and Ensign have sent off their authorisation applications to The Pensions Regulator (TPR).
Self-administered pension funds spent £15bn on payments to pensioners in Q4 2018, but received just £12bn in contributions (net of refunds), Office for National Statistics (ONS) data reveals.
Aberdeen Standard Investments (ASI) and Gresham House are to team up to form a joint venture.