UK - Smaller pension schemes have better access to liability driven investment (LDI) vehicles in an increasingly competitive market, according to new research from KPMG.
KMPG said there had been a sharp rise in pooled LDI vehicles which could be attractive for small and medium sized pension schemes due to their increased accessibility and lower cost compared with segregated solutions.
Simeon Willis, executive consultant, KPMG, said: "The number of pooled funds has grown rapidly over the last three years with the number of managers in this field trebling between 2005 and 2007."
Willis added: "There has also been an increase in the diversity of managers' offerings which range from straightforward long-duration bullet funds to sophisticated full interest rate and inflation hedging with embedded options which allow investors to retain some upside."
Despite the buyout market making considerable progress, many companies are committed to engaging with their pension funds and investigating tools to find value and make the schemes work.
McCoy concluded: "Unlike ten years ago when surpluses abounded, there is still a pensions black hole and a lot of money being thrown into it so pension funds have to address the risks inherent in their liabilities. LDI has a key part to play in doing that."
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