Hedging increases continue despite RPI reform clapback
Pension scheme inflation hedging activity fell by 17% quarter-on-quarter to £30.4bn in the first three months of the year, BMO Global Asset Management research reveals.
Pension schemes increased their inflation hedging in the final quarter of 2020 as major issues were concluded in a “momentous geopolitical quarter”.
Pension schemes significantly heightened their interest rate and inflation risk hedging in the second quarter of the year, according to BMO Global Asset Management.
Levels of inflation hedging remain strong despite there being no clarity on the outcomes of potential retail price index (RPI) reform, BMO Global Asset Management says.
The amount of hedging against interest rate risk rose to £31.7bn in the fourth quarter of last year, according to BMO Global Asset Management.
The level of interest rate hedging increased to £29.5bn of liabilities in the second quarter as pension funds continued to de-risk, according to BMO Global Asset Management's research.
Hedging appetite fell during the second quarter of this year as a lack of index-linked gilt supply continued to bite, BMO Global Asset Management has said.