Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Moody's - Climate Risk Insurers series
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • June 2013
06

Liability-driven investment by pension schemes 'up to £446bn'

Open-access content Monday 17th June 2013 — updated 8.01pm, Wednesday 6th May 2020

The amount of pension scheme liabilities managed using a liability-driven investment strategy to reduce risk increased by 11% last year to £446bn, according to figures published by KPMG today.

The consultancy's research found that 686 UK pension scheme mandates now use LDI, which generally involved hedging the scheme's exposure to changes in interest rates and inflation.

It also found that, while more fund managers were entering the LDI market, it continued to be dominated by three companies - Legal & General, Insight and Blackrock - which between them control 90% of the LDI market's value. 

Tom Brown, head of investment management for KPMG in the UK, said: 'Whilst the market continues to be dominated by the "big three", growth has not been confined to them. Fund managers with both medium and large LDI businesses have added to their number of mandates over the year, although at the smallest end of the market the results were more mixed. And the fund management industry is optimistic about the future for LDI.'

Over one-third of the mandates for LDI have extension triggers in place, which means the approach could be used to hedge more liabilities. KPMG noted that the market had witnessed increased appetite for schemes to use wider derivative strategies to capture return-seeking exposures such as equity and credit which could drive returns as well as hedge risks.

Barry Jones, head of LDI research at KPMG said: 'Pension schemes continue to look for ways in which to reduce funding level risk. In an environment where cash is king, derivative based strategies appear to be a popular way of controlling key risks whilst freeing up assets that can earn a premium invested elsewhere. This is why we have seen growth in both LDI and Synthetic Return Generating strategies over the last year.'

KPMG's research also found that 80% of LDI managers expect their greatest source of new business to come from pension schemes which had previously not used an LDI strategy.

Jones said this showed that 'the continued development of propositions by smaller LDI players looking to challenge the market appears fully justified. The question remains whether these players can take significant market share from the big three in the segregated space which accounts for the vast majority of LDI assets in the UK'.

This article appeared in our June 2013 issue of The Actuary.
Click here to view this issue
Filed in
06
Topics
Investment

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Risk Actuary - General Insurance

London (Greater)
£60,000 - £85,000
Reference
145934

Project Actuary - Life Insurance

Midlands
£60,000 - £110,000
Reference
145933

Model Validation Actuary

London (Greater)
£60k - £80k
Reference
145932
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2023 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ