Special Reports » OTHER REPORTS » DERIVATIVES

It is not an easy time to be a pension fund trustee, with any mismatch between assets and liabilities coming under the regulatory microscope. But some careful playing with derivatives can close embarrassing holes in company balance sheets. Elizabeth Cripps reports.

 Given regulatory pressures over assets and liabilities, it should come as no surprise that derivatives are proving as popular as penicillin in a flu epidemic. Where big funds lead, smaller ones are likely to follow, and State Street Global Advisors (SSgA) has just launched its Pooled Asset Liability Matching Solution, a pooled product through which to access the new best thing.

— Rupert Brindley, UBS

Rupert Brindley examines some of the common themes driving pan-European ALM initiatives, noting some surprising differences in implementation.

Asset/liability management (ALM) transactions have had a major influence upon financial markets over the past five years, and this trend shows no sign of abating. Dutch and UK pension funds are now following in the footsteps of UK life companies and Danish pension funds as they seek to de-risk their funds. As we write in Q1 2005, fixed income and inflation markets are transfixed by the prospect of a wholesale reallocation out of performance assets and into long-term bonds, with a correspondingly profound impact upon long-term yields.