| Balancing the books A figure guaranteed to grab headlines, and send readers into a panic, came from the Office of National Statistics (ONS) this week which reported that the value of private sector defined benefit (DB) plans fell almost a third from more than GBP2 trillion at the start of 2022 to less than GBP1.4 trillion at the end of March.
"Staggering" losses indeed, but what many may have missed is that while asset values have fallen, so too have the DB plans’ liabilities, and by considerably more, which means that overall funding ratios have improved.
Ultimately this is what liability-driven investment is all about: matching assets to liabilities so that irrespective of market conditions DB plans still balance the books.
However, this week we hear from Rudy Khaitan, Managing Partner of later-life lending specialist, Senior Capital, who says trustees should move away from gilts in favour of
"embracing the benefits residential mortgage-backed securities (RMBS)" which he says, "could lead to a greater retirement security for UK pensioners".
RMBS offer fixed income returns which help provide risk mitigation in rising inflation and interest rate environments and, given the scarcity of instruments offering such long-dated characteristics, these could prove an additional tool in the insurance and pension industry’s investment kit.
We also report on investment ‘megatrends’ as defined by asset manager Pictet Group, which interviewed over 50 experts including investors, academics, scientists and CEOs to identify 21 future areas of investment interest.
Unsurprisingly climate change is a big feature, or more specifically its impact on the planet’s ever-diminishing resources.
Pictet predicts significant investment opportunities in technology that will help manage resource scarcity, noting that the "number of patents for
waste recovery and water resource management has nearly doubled since the year 2000. Businesses with leak prevention technology give exposure to this megatrend".
And in resource-efficient agriculture, investment opportunities lie in reducing food waste. For example, the rise in AI-driven sensors that "determine when a fruit or vegetable is about to be wasted and should be repurposed, for example, into sauce or juice".
Elsewhere we bring news of Robeco’s expansion into the ETF market with the appointment of former Fidelity and BlackRock guru, Nick King as to spearhead the firm’s expected launch of an ETF investment platform in the second half of 2024.
Act now: The Institutional Asset Manager 2023 awards’ Service Provider nominations closes today.
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Gill Wadsworth, Editor
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