Can investment-grade private credit boost DB schemes ahead of buyout?
Discover two key strategies for transfer-aware defined benefit pension schemes.
Buyout Ready Investing
Helping DB schemes manage liability risks and invest efficiently towards buyout.
Our capabilities
Investment componentry
We are committed to working with clients of all sizes to help them meet their objectives.
Complemented by our bespoke buyout ready solutions service, our award-winning range of pooled funds enable clients to put in place a holistic investment solution across liability driven investment (LDI) and credit to hedge insurer pricing and interest rate and inflation risk, and ultimately invest towards their endgame.
We also offer a range of buyout ready and LDI solutions managed on a segregated basis.
Enhanced services
Across our teams in pension and insurance solutions and liability aware portfolio management, we have the ability to offer sophisticated solutions from liability benchmark construction to bespoke reporting.
Under our dynamic inflation hedge service for segregated clients, we automatically change the liability cashflow benchmark to take account of changing inflation sensitivities resulting from changing levels of inflation and the interaction with caps and floors in the inflation linkage. This has the benefit of more accurate hedging over time but also tends to generate a marginal gain.
Buyout ready portfolios
Whether you are approaching buyout in the short-term or looking to evolve your solution with this as an end goal, our pensions and insurance experts are on hand to consult on options to become ‘buyout ready’.
Utilising our long heritage – having been founded in 1825 as an insurance company – and our extensive experience managing insurance assets, we create matching adjustment-eligible portfolios in line with how these are typically implemented by bulk purchase annuity providers.
Available via our Buyout Ready Credit Nominal and Real pooled funds or as a segregated solution.
Our pooled fund solutions
A commitment to make it easier for you and your clients
Our Buyout Ready pooled fund solutions are a strategic priority at abrdn. We have invested significant resource and experience into working with pension scheme clients and their advisors to deliver the right solutions and services for your scheme.
The funds provide a low-cost, low-governance way of accessing hedging and cashflow solutions. The funds are competitively priced, making use of a simple and transparent charging structure.
Whether you are a new or existing client, we offer detailed analysis and solution design to help meet your scheme’s objectives with unique insight into how an insurer would invest for your scheme and additional services to help smooth your journey toward an insurance transaction.
Our Insurance and Pension Solutions team draw on their experience working as investment and actuarial consultants to create tailored solutions for our clients and provide a bespoke service supported by a dedicated client relationship team.
Liability aware equity
- Providing liability hedging plus exposure to passive global equities in a single fund
- Efficient use of collateral
- Helping underfunded schemes meet return requirements without sacrificing interest rate and inflation hedging.
Liability driven investments (LDI)
- Hedge interest rate and inflation risk through a range of hedge profiles
- Transparent, low cost and low-governance approach
- Complimented by our credit fund range.
Buyout ready credit
- Long-duration credit fund investing in insurer-friendly bonds.
- Predictable series of cashflows secured by Matching Adjustment eligible assets.
- Used alongside our LDI fund range to build buyout ready portfolios.
- Unique real credit fund allowing clients to hedge inflation risk using credit.
Our segregated LDI offering
A segregated mandate enables precise matching of the scheme’s characteristics to a level beyond what is possible via a pooled solution – in particular, in relation to initial and ongoing interest rate / inflation hedging together with cashflow matching.
abrdn’s Liability Aware team have significant experience managing both pooled and segregated LDI solutions successfully for over 15 years. We currently manage a number of segregated LDI mandates, including mandates from £100m to over £3bn of liabilities hedged, for both pension scheme and insurance clients.
As well as managing segregated pure LDI mandates, we manage a number of mandates that combine LDI, fixed income and growth assets. For example, we utilise our experience in managing the assets of Bulk Purchase Annuity (BPA) providers to build tailored buyout ready portfolios.
Our segregated offering is flexible, and we would be happy to provide a tailored proposal for any new opportunities, reflecting the client’s specific requirements.
Passive LDI
- Bespoke Liability Benchmark
- Interest rate and inflation hedge ratio targets with standard tolerances
- Diversified panel of derivative counterparties (ISDA and GMRA) via our umbrella documentation
- Clear standardised quarterly reporting of performance and positions
Enhanced LDI
- Bespoke dynamic Liability Benchmark, which automatically updates as inflation outlook changes
- Bespoke automatic hedge extension program based on time and/or funding level
- Diversified panel of derivative counterparties (ISDA and GMRA) via our umbrella documentation
- Tailored quarterly reporting
LDI plus credit/growth
- Segregated mandate with multiple objectives across LDI / Credit / Growth
- Access to synthetic growth exposure such as synthetic equity or CDS
- Central collateral pool for all derivative exposure
More about our solutions
Defined Benefit
Our liability aware franchise, alongside our broad asset class capability, underpins our governance-focused solutions.
These include our fiduciary management service and our DB pensions master trust, which enable clients to delegate full or partial responsibility for managing their pension scheme and its assets to abrdn.
Fixed income
We have built a global fixed income capability that aims to allow investors to harness a wide range of fixed income potential.
We use our global research platform and local market knowledge to identify compelling opportunities. We then construct robust, diversified portfolios – that fully integrate ESG factors – to meet client goals consistently, reliably and sustainably.
Sustainable investing
By harnessing the power of investment, we’re dedicated to creating more opportunity for our clients - and more positive impact for the world around us.
Our embedded expertise, proprietary research and tools, as well as an active ownership approach adds value to our clients via a range of sustainable solutions designed to meet your financial goals and objectives.
Risk warning
The value of investments, and the income from them, can go down as well as up and an investor may get back less than the amount invested. Past performance is not a guide to future results.
Contact us
If you would like to find out more about liability aware or any other DB solutions, please get in touch with a member of the UK Institutional team at ukinstitutionalall@abrdn.com.
Email is not a secure form of communication so please don’t send any personal or sensitive information.