Devising a more profitable investment strategy for an in-deficit scheme
An in-deficit scheme required a more ambitious investment strategy. We helped our fellow trustees to appreciate the unusual and complex investment proposals.
Part of the strategy involves obtaining exposure to equity returns whilst not actually owning any equities. This is achieved through synthetic equities, which allow the equity returns to be exchanged for LIBOR-related returns. This enables the scheme to generate equity-like returns whilst holding physical bonds as its underlying assets, thus improving the scheme’s hedging.
The scheme has also diversified some of its assets into hedge funds, and specialist property investments. Current predictions show that the return on the scheme’s assets has increased by approximately 1%, with the downside risk being slightly reduced.