UK - The liability risk-hedging market in the UK surpassed £40bn (US$62.5bn) in 2009, smashing the previous record of £35bn set in 2007, Towers Watson said.
The consultancy said the growth in the liability risk-hedging market was due to increased use of physical bonds for matching, along with greater demand for buy-ins and the evolution of longevity hedging.
Towers Watson EMEA head of investment Paul Trickett said: "The extreme market conditions which caused significant delays in the execution of derivatives-based liability hedging strategies in early 2009 did not diminish demand by institutional investors for reducing liability-related risks through matching."
He added this combined with other factors - such as the evolution of longevity hedging - meant the market is back on the path to growth.
The firm said the UK inflation-linked market for end users, excluding trades between banks, reached around £25bn in 2008, surging from only £3bn in 2004.
Trickett said: "The growth is likely to be driven by the recognition that fiduciaries can reduce liability-related risks without significantly impacting expected returns."
He explained fiduciaries can now hedge out a large proportion of interest rate and inflation liability-related risks while retaining exposure to non-matching, return-seeking assets.
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