Schroders. Top 10 tips for de-risking. De-risking goals for your defined benefit pension scheme. For professional investors only

Transcription

1 Schroders Top 10 tips for de-risking De-risking goals for your defined benefit pension scheme For professional investors only

2 What is the goal of your de-risking plan? A buy-out of the liabilities? Or to achieve self-sufficiency*?»* this is where the scheme is run on a low risk basis with no additional contributions required Start with the end in mind

3 Some risks are rewarded with higher expected returns (e.g. equity risk) and some generally are not (e.g. liability risks). Pension schemes should focus on reducing»unrewarded risks Look to take rewarded risks

4 There are a range of Liability Driven Investment (LDI) strategies that can free up assets to invest in return»seeking strategies Protecting against liability risk doesn t mean giving up growth

5 Only take risk when you need the reward. As funding levels improve, downside protection is more of a»priority than chasing further rewards Funding level comes first

6 Are your liabilities mainly fixed or inflation linked? Does your scheme fund on a gilts or swaps basis? Could you benefit from diversification or equity protection in your growth assets? Which tools»in the toolbox are the trustees willing to use? Use the right de-risking tools

7 Tackle larger risks (such as equity or interest rate risk) before those with a less immediate impact»(e.g. longevity risk) Prioritise

8 A de-risking strategy should enhance a pension scheme s governance structure and provide»a framework for effective decision making Governance is key

9 The best de-risking plans are a coalition between the»corporate sponsor and the pension scheme trustees Sponsor involvement

10 »This lets the pension scheme benefit from independent oversight from their consultant and timely monitoring/ market expertise from their fund manager Focus on partnership

11 Cost-effective de-risking solutions are increasingly available to smaller pension schemes. These allow all schemes to access a range of tools previously»used only by larger schemes Don t assume you are too small

12 Contact us If you feel a Flight Path strategy could help your scheme meet its investment objectives, please contact: Robert Bee Institutional Business Development Tel: +44 (0) robert.bee@schroders.com James Nunn Institutional Business Development Tel: +44 (0) james.nunn@schroders.com Dianne Ramsay UK Strategic Solutions Tel: +44 (0) dianne.ramsay@schroders.com Jonathan Smith UK Strategic Solutions Tel: +44 (0) jonathan.smith@schroders.com Schroder Investment Management Limited 31 Gresham Street, London EC2V 7QA, United Kingdom Phone: +44 (0) flightpath@schroders.com Website: Authorised and regulated by the Financial Conduct Authority. For your security, communications may be recorded or monitored. Important information: This booklet is intended to be for information purposes only and it is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The material is not intended to provide, and should not be relied on for, accounting, legal or tax advice, or investment recommendations. Information herein is believed to be reliable but Schroder Investment Management Limited does not warrant its completeness or accuracy. Reliance should not be placed on the views and information in the document when taking individual investment and/or strategic decisions.

13 Contact our dedicated DC team to discuss the ways in which we may be able to add significant value for your DC scheme and its members. Issued in September 2013 by Schroder Investment Management Limited 31 Gresham Street, London, EC2V 7QA. Registered no England Authorised and regulated by the Financial Conduct Authority. w43905