what will european and uk pension funds do next?

Private & Confidential BNP Paribas' 4th Annual Inflation Conference 20 September 2012

What will European and

UK Pension Funds do

next?

1

Robert Gardner

4th Annual Inflation Conference


UK Pensions Today 30 Year Nominal Gilt Yield

2

0

1

2

3

4

5

6

7

8

9

30

-Ye

ar N

om

inal

Gilt

Yie

ld in

%

High 17th May 2002

=5.12%

Low 31st Dec 2008

=3.70%


Liability Driven Investment

Maximize your Toolset

3

Private & Confidential BNP Paribas' 4th Annual Inflation Conference 20 September 2012 4

Source: Bloomberg, Redington

Liability Driven Investment

30-Year Gilt Real Yield


Setting Clear Goals & Objectives

Good Governance=Ability to Act

5

Attaining Agility

Instituting good governance and

staying on top of market developments

gives pension funds the Agility to take

advantage of opportunities and risks.

Taking Control

A solid framework for making decisions

that incorporates long-term goals and

risk constraints puts pension funds in

Control.

Achieving Transparency

On-going monitoring of progress and

risks gives pension funds the

Transparency to make the right

decisions.

“ACT enables clients to manage their risks effectively, exploit attractive opportunities and ensure progress towards full funding.”


Setting Clear Goals & Objectives The Pension Risk Management Framework

6


Setting Clear Goals & Objectives The Flight Plan from “set and forget” to “anticipate and react”

7

2012 2013 2014 2015 2016 2017 2018 2019 2020

GBP

Mill

ions

Liabilities Path Actual Liabilities Assets Path Actual Assets

Time Horizon

Liability Basis

Contributions & Asset Returns


Setting Clear Goals and Objectives

The PRMF Dashboard

8


Credit Spread and Gilt Yield Evolution

9

Source: Redington; Bloomberg, Bank of America Merrill Lynch.

-100

0

100

200

300

400

500

600

bp

s

Sterling IG 15+ Corporate Spread 20-Year Gilt Real Yield IG Spread + Real Yield


The Fixed Income Universe

10

Numbers refer to the approximate size of each investment universe ($trn).

Source: Redington; Barclays (IG, ABS); iBoxx (Subfins); Babson Capital (High Yield, Lev Loans, CLOs); Bluebay Asset Management, Stone Harbor Investment Partners (EM).


The Case for Unconstrained Fixed Income: 2006-2012

11


The Case for Unconstrained Fixed Income: Today

12


Flight Plan Consistent Assets

13

Social Housing

Traditional Infrastructure Ground Rents

Secured Leases

Examples of FPCAs


13-15 Mallow Street London EC1Y 8RD Telephone : +44 (0) 20 7250 3331 www.redington.co.uk

Contacts

Robert Gardner Founder & Co-CEO Direct Line: +44 (0) 20 7250 3416

Telephone: +44 (0) 20 7250 3331

[email protected]

14

THE DESTINATION FOR ASSET & LIABILITY MANAGEMENT

Disclaimer For professional investors only. Not

suitable for private customers.

The information herein was obtained from various

sources. We do not guarantee every aspect of its

accuracy. The information is for your private information

and is for discussion purposes only. A variety of market

factors and assumptions may affect this analysis, and

this analysis does not reflect all possible loss scenarios.

There is no certainty that the parameters and

assumptions used in this analysis can be duplicated with

actual trades. Any historical exchange rates, interest

rates or other reference rates or prices which appear

above are not necessarily indicative of future exchange

rates, interest rates, or other reference rates or prices.

Neither the information, recommendations or opinions

expressed herein constitutes an offer to buy or sell any

securities, futures, options, or investment products on

your behalf. Unless otherwise stated, any pricing

information in this message is indicative only, is subject

to change and is not an offer to transact. Where

relevant, the price quoted is exclusive of tax and

delivery costs. Any reference to the terms of executed

transactions should be treated as preliminary and

subject to further due diligence .

Please note, the accurate calculation of the liability

profile used as the basis for implementing any capital

markets transactions is the sole responsibility of the

Trustees' actuarial advisors. Redington Ltd will estimate

the liabilities if required but will not be held responsible

for any loss or damage howsoever sustained as a result

of inaccuracies in that estimation. Additionally, the client

recognizes that Redington Ltd does not owe any party a

duty of care in this respect.

Redington Ltd are investment consultants regulated by

the Financial Services Authority. We do not advise on

all implications of the transactions described herein.

This information is for discussion purposes and prior to

undertaking any trade, you should also discuss with

your professional tax, accounting and / or other relevant

advisers how such particular trade(s) affect you. All

analysis (whether in respect of tax, accounting, law or of

any other nature), should be treated as illustrative only

and not relied upon as accurate.

©Redington Limited 2012. All rights reserved. No

reproduction, copy, transmission or translation in whole

or in part of this presentation may be made without

permission. Application for permission should be made

to Redington Limited at the address below. Redington

Limited (6660006) is registered in England and Wales.

Registered office: 13-15 Mallow Street London EC1Y

8RD

Risk Management Firm of the Year (2011, 2012)

Pension Consultant of the Year 2012

http://twitter.com/robertjgardner

http://uk.linkedin.com/in/robertjgardner

http://twitter.com/robertjgardner

http://uk.linkedin.com/in/robertjgardner

what will european and uk pension funds do next?

Economy & Finance