U.K. pension funds hedged more than £11.4 billion ($18.7 billion) in liabilities against inflation as of Sept. 30, up marginally from £11.3 billion the previous quarter but 72% higher than a year earlier, according to F&C Asset Management estimates.
Pension funds that missed the opportunity to hedge at more attractive prices in the first half of 2009 still moved into hedging derivatives in the third quarter, according F&C. “They’re not being put off by relatively higher prices,” Alex Soulsby, derivatives fund manager at F&C, said in an interview.
F&C’s estimates are based on responses to its quarterly LDI survey of major investment banks, which gathers data on trading of derivatives pension funds use in synthetic LDI strategies. Mr. Soulsby said the survey represents about 90% of all LDI-based derivatives trades.