Intelligent solutions for the Risk Management challenges facing UK pension schemes

Chris Wagstaff presented at the 13th Annual Fund Manager Selection conference

Chris Wagstaff, Client Director Executive Education and Cass Visiting Fellow, was invited to present his paper "Intelligent solutions for the risk management challenges facing UK pension schemes: a case study", at the 13th annual and internationally renowned Fund Manager Selection Conference, held at the Meliá White House in central London on 29th and 30th April.

As Chris explained to the 100 asset managers, fund selectors and investment consultants attending, "Post-crisis, risk management has risen to the top of almost all defined benefit scheme trustee agendas. After sponsor covenant risk, successfully managing the risks surrounding the achievement of a scheme's journey plan to full funding or buyout, has become trustees' principal focus.

In short, this means adopting a holistic and actively managed liability driven investment (LDI) programme, which seeks to mitigate the scheme's long-run unrewarded risks while capturing a diversity of long-run potentially rewarded risks, in both an efficient manner and at the right price. In so doing, trustees need to keep on eye on the scheme's risk budget and a whole host of risk metrics, while keeping the other on ultimately moving the scheme to a terminal portfolio once all of the unrewarded risks are nailed down."

By way of case study, Chris provided delegates with an overview of how the £13bn Aviva Staff Pension Scheme, by intelligently executing and continually honing its LDI programme over a six year period, dramatically improved its funding position and secured a more sustainable future for its members. This was achieved despite particularly challenging economic and market conditions, notably declining real yields, and a weakening sponsor covenant.

Chris' presentation is available for download at the link below.