State Street Global Advisors, London, launched what is believed to be the first pooled strategy that allows U.K. pension plans to match their future liabilities.
The Pooled Asset Liability Matching Solution offers eight funds with different maturities to match liabilities out to 40 years, said Joe Moody, senior investment manager-global fixed income.
New accounting rules introduced in the United Kingdom this year require plan sponsors to value pension liabilities against market rates for 10-year corporate bonds. As a result, finance directors and pension trustees have become increasingly keen to match pension assets to liabilities and reduce the risk of underfunding. But the lack of long-dated bonds has meant that trustees have struggled to extend the maturity of their fixed-income portfolios.
The PALMS funds are based on the retail price inflation swaps curve, which gives investors access to bond derivatives with more liquidity and longer maturity, said Mr. Moody.
SSgA plans to launch a similar product in the Netherlands in the next six months. The firm has also been talking with U.S. clients about launching a strategy, but so far, demand for a pooled product is limited, he said.
Mr. Moody would not identify clients but said SSgA hopes to attract £200 million to £500 million within the next six months.
