The KPMG View: Liability Hedging (PDF 665 KB)
The headlines in pensions over the last three months have been dominated by the impact of falling government bond yields and implications on funding positions. Since the start of 2014, most pension schemes have seen their liabilities increase by over 20%.
In our recent client note we review the current market conditions, provide our views and consider the common question of whether hedging at these levels makes any sense.
Equities – is it time to reduce the exposure? (PDF 1.61 MB)
A recent research paper our equity team has produced exploring the current investment case for equities. It analyses their performance in recent years, what may have helped drive this, current market valuation levels, the risks going forward and what our medium term expectations are for the asset class.
While we are aware that calling the short term direction of equity markets is notoriously difficult, the paper concludes the risks of seeing below average returns from the asset class in the medium term are increasing.
Navigating the UK LDI Market (PDF 1.59 MB)
KPMG finds UK Liability Driven Investment (“LDI”) now covers £517bn of liabilities, a 17 percent increase over 2013 with 825 UK pension scheme mandates now employing LDI.
Timberland Investment case (PDF 813 KB)
Timberland investment has historically produced a steady stream of returns with premiums above inflation and low correlation to traditional asset classes. Apart from the strategic case, the recovery of the US housing market, expected increase in demand for timber from developing countries and an expected decrease in supply from Canada, a major timber exporter, have made the investment opportunity potentially more attractive. This paper explores the potential benefits and risks of investing in timberland, and how a pension scheme can incorporate this investment in its portfolio.
Allocation to Investment Grade Corporate Bonds – is it time to reconsider? (PDF 675 KB)
UK pension funds traditionally allocate to investment grade bonds as part of their matching allocation to hedge some liability risks and achieve a return above gilts. This paper revisits this against the backdrop of the current market conditions. We believe there are alternative approaches which can provide better liability hedging whilst maintaining, or even enhancing, the expected return of the overall portfolio.
European responsible investment fund survey (PDF 1.1 MB)
In this first edition of European Responsible Investing Fund Survey, KPMG gives a snap shot of the European Responsible Investing Fund universe as at 31 December 2010.
The evolution of an industry: 2012 KPMG/AIMA Global Hedge Fund survey (PDF 1.43 MB)
This paper features analysis of KPMG and AIMA’s recent survey of 150 global hedge fund managers and highlights their insights and opinions on a range of issues that are changing the face of the industry.