Archive

Archive for the ‘Liability Hedging’ Category


Multi-asset investing – how much risk can you afford?

Investors today face a challenging landscape, with high valuations across many traditional asset classes. Those high valuations come with low prospective returns, below-normal yields and, last but not least, high risk of significant drawdowns. More than ever, investors need to consider how much risk they can afford in pursuit of their investment goals. And more

To Hedge or Not to Hedge – Blog 4

Liability hedging has always been a difficult investment decision for pension trustees to make. This is the final blog in a series that explains the hedging question as ‘right sizing your risk’. In this final blog around liability hedging we will look at carry and the cost of waiting to hedge. Carry and the cost

To Hedge or Not to Hedge – Blog 3

This blog is one of a series that explores some of the features and drivers of the term structure of interest rates and how they can influence the hedging question. In my last blog we saw that hedging strategies will only underperform if interest rates increase by more than what is currently priced into the

To Hedge or Not to Hedge – Blog 2

Liability hedging has always been the hardest investment decision for pension trustees to make, but right now, with interest rates so low, it seems that all the risks are one-sided. Faced with a low interest rate environment many pension trustees are considering a delay to planned liability hedging. In my first blog we looked at

To Hedge or Not to Hedge

Discussions around liability hedging have never been so topical. Notwithstanding the selloff in real and nominal interest rates seen since January of this year, rates are still at very low levels and many question whether now is the right time to hedge. Apart from the economics there are also behavioural aspects in play, most notably

Excitement x 3 – the election, bond sell-off, and Legoland…

After the excitement of the Election, life returns to normal for the voting public, including pension trustees. Normality for trustees should include having a clear plan for using bond market volatility as an opportunity to de-risk. One of the implications of a General Election is that thousands of public buildings across the country have to

What exactly do you do all day?

There’s a running joke in the Rae household about what I actually do at work. My eldest now thinks I play Match Attax (don’t ask), my middle thinks I’m a builder and my youngest wishes I was Sir Topham Hatt (*makes a mental note to go to the gym more). The reality is perhaps less

Mar 26, 2015 Categories: Investment Strategy, Liability Hedging

Riding the waves of the bond markets

Recent movements in the gilt market have reinforced the importance of ensuring that the design and implementation of a hedging strategy remains flexible enough to withstand market realities. Over the last month, we’ve seen the yield on the 30 year gilt move from 2.40% on 8 January all the way down to 2.08% on 30

Feb 18, 2015 Categories: Investment Strategy, Liability Hedging

The Smoke and Mirrors behind Quantitative Easing

Another QE bazooka from the Central Banks, with the European Central Bank (ECB) announcing last month that another €1.1 trillion of money will be pumped into the Eurozone economy. Over the past number of years I have heard time and time again that the massive rounds of quantitative easing (QE) taken by many of the

Dynamically manage your Z spreads? For how much longer?

Dynamically manage your Z spreads? For how much longer? An increasingly common feature of liability hedging portfolios has been the smart use of different types of interest rate and inflation exposures. It is possible to hedge liability interest rate and inflation risk using gilts and index linked gilts or combinations of interest rate and inflation

Nov 27, 2014 Categories: Investment Strategy, Liability Hedging

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