Philip Lambert, ex-CEO of the Unilever Pension Fund, speaking to FT Mandate at the 27th SFOA Bürgenstock meeting contended that greater dialogue was “definitely” required if pension funds and their trustees were to make more informed decisions in applying derivatives and to help “bridge the duration gap” - the mismatch between assets and liabilities.
Andreas Preuss, chief executive officer at Eurex, added: “We have only scratched the surface of potential business from pension funds and fund management houses.” The exchange had nevertheless witnessed “significantly” increased activity from pension funds, insurance companies and asset managers, but not all had the same needs.
Against a backdrop of surging derivative volumes traded and cleared on Eurex – 26.4 per cent year-on-year growth to the end of August 2006 – Mr Preuss saw education as playing a “key” role in reaching its target end-user groups, raising the industry’s profile and “showing the importance of derivatives as a mechanism for global risk management.” Derivatives were becoming increasingly relevant with the days of benchmarking “being over” for fund managers.
“In an absolute return environment, exchange traded derivatives are increasingly the instrument of choice with portable alpha and tactical asset allocation strategies, helping to preserve capital and deliver steady returns,” Mr Preuss added.
Eurex now intends to “offer the broadest possible portfolio of risk management products of risk management solutions”. Spanish and Swedish equity options will shortly be offered, thus providing 49 of the 50 components of Eurostoxx 50, and exchange listed derivatives are in the pipeline.
Brendan Bradley, Eurex’s global head of product strategy, said the exchange “always” approached product development by going to the end customers to find out exactly what they wanted. While noting the role of intermediaries, he said there was a “dilemma” in terms of education and what was possible product-wise. “If we are talking to some of the pension funds… the trustees are not always necessarily the best educated.”
“Obviously exchanges have attempted to help, but it’s not always that easy to get to the trustees and educate the right people. Some of the asset managers also hide behind this by saying they cannot use derivatives because the trustees don’t allow them to. The truth is
that even some asset managers are not educated enough to use the derivative products themselves,” Mr Bradley added.
The Options Industry Council, the world’s largest clearing house for options based in Chicago, this month revamped its website (www.888options.com) specifically to foster dialogue with institutional investors.
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