Driving Cutting-Edge in LDI
Redington's founders, Dawid Konotey-Ahulu and Robert Gardner, executed the first holistic interest rate and inflation risk management transaction for a FTSE 100 Defined Benefit pension scheme – the Friends Provident
Pension Scheme in 2003.
Redington remains at the cutting-edge of developments in LDI and we are proud to say that we continue to help our clients to find efficient and innovative solutions for managing their exposure to interest rates and inflation risk.
How We Add Value
Pension Risk Management Framework
A “Pension Risk Management Framework” establishes a clear plan for a pension scheme to achieve its objectives within its own particular constraints. Our clients that have a Pension Risk Management Framework in place find that this provides them with transparency over the position of the scheme along its Flight Plan (i.e. the trajectory of the assets and liabilities over time to the end goal of full funding), the ability to evaluate each opportunity according to how it supports their progress towards their objectives, the ability to make timely decisions, and hence greater control over the process of setting investment strategy.
Dynamic Implementation and De-risking
Financial market conditions are constantly changing: a strategy that worked under certain conditions by no means works under another. Our proactivity, along with our dynamic approach
to implementation, enables clients to adapt their investment strategies quickly in response to changes along their Flight Plan, and to take advantage of relative value opportunities in the markets.
What was yesterday’s “hot idea” may be today’s old news. We are constantly seeking innovative investment strategy and risk management solutions, including the use of instruments such as secured leases, ground rents and social housing. To learn more, contact one of the senior consultants at Redington
We believe that it is imperative for a scheme to constantly monitor their key risk and return metrics, and to have the ability to understand what may drive deviations from their expected Flight Plan. By understanding this, the scheme can make informed decisions about investment strategy in the face of changing market conditions. For example, against the backdrop of the current financial crisis, we have helped a number of clients to:
Change an existing hedging portfolio e.g. using physical Gilts and synthetic equities instead of physical equities and interest rate / inflation swaps
Address the issue of efficient collateral management
Re-balance "in the money" hedges
The Redington Governance Structure
Strong governance and frequent communication is paramount in ensuring the effective management of an investment strategy. We have encouraged many of our clients to increase the frequency of their investment sub-committee
meetings and to allow the flexibility to convene meetings/conference calls at short notice. In practice, a dynamic approach to investment strategy may require that, once a strategy is set, detailed investment design and implementation may be best delegated to a smaller sub-group of trustees who, together with the asset manager and investment consultant, would form an Investment Working Party
This agile approach is particularly important during any implementation phase in order to enable a dynamic response to changes in market conditions.