The U.K. market for inflation-linked swaps could exceed £9 billion ($15.7 billion) during 2005, in part due to increased demand from U.K. pension funds, confirmed Paul Deane-Williams, senior investment consultant with Watson Wyatt Investment Consulting. The U.K. inflation-linked swap market for end users, excluding intra-bank trades and executions with insurers, was estimated at about £3 billion in 2004, according to a Watson Wyatt news release issued today. "The precise scale of activity is difficult to measure, since most deals are conducted privately between banks and pension funds," the release said.
Pension fund officials are searching "for more effective ways to manage risk" and are realizing that "derivatives can alter the nature of that risk in ways that are not possible in the cash markets," Kevin Carter, European head of investment consulting at Watson Wyatt, said in the statement.
