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Pension Funds

European funds monitoring banking relationships

Pension funds on the European continent are ensuring that their relationships with managers and banks are compliant with European Union law so their investments and derivatives exposures are protected in case a no-deal Brexit becomes reality.

Pension funds say they have to worry about their contractual relationships with investment banks as derivatives trading will be required to be conducted with EU legal entities in the event of a hard Brexit, under the rules of Markets in Financial Instruments Directive.

"I hope they will find a solution in time and (banks) will be able to continue trading," said Jan Ritter, head of liability hedging and treasury at ATP, Hilleroed, Denmark.

But, in the meantime, "We are making sure that we can handle a hard Brexit operationally," added Mr. Ritter at the 785 billion Danish kroner ($120 billion) pension fund, which has a swap hedging process in place for around half of its liability book.

"We have a number of counterparts banks, which are London-based banks and we are in the process of replicating and amending contracts with them."

Regarding the cost of this process, he said: "We haven't seen the bill yet."

"We are making sure that we can move the contracts, not that we will move them necessarily."