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​UK DB schemes ‘holding too much’ in growth assets, illiquids

first_imgUK defined benefit (DB) schemes have reduced investment risk in the last nine years as they have matured, but for some sponsors this process has still not gone far enough, according to a new report.Research by consultancy Barnett Waddingham showed that, as FTSE 350 DB pension schemes have matured, asset allocation has ratcheted down to 31% growth assets in 2019 – from 51% in 2010.However, schemes approaching buyout in the next five years had an average of 27% allocated to growth assets, which exposed companies to unnecessary risk, the firm said.Nick Griggs, head of corporate consulting at the firm, said: “As schemes have matured, a general de-risking has been inevitable, but corporates need to seriously consider whether they have gone far enough. “Especially for those close to the endgame, being proactive with your strategy is crucial in ensuring the level of investment risk matches the agreed objective, whether that’s an insurance company buyout or a run-off.”The consultancy said it would expect to see companies aiming for a buyout within two years typically holding 10-15% or less in growth assets. Those that were two to five years away should hold no more than 15-25% – although the recommendation depended on the individual scheme.UK DB schemes’ funding positions were still under threat from falls in long-term interest rates, according to the consultancy.“With economic and political uncertainty driving global bond yields lower, as investors look to move into safe haven assets, schemes can do more to neutralise the impact of this and reduce the volatility of funding levels,” it said.Some firms looking to buyout in the next five years were also holding illiquid assets, with 4% of their assets on average being property investments, the firm said.“These take time to dispose of, and are unlikely to be accepted by insurers as part of a premium payment for buyout,” it warned.Barnett Waddingham also said overexposure to growth assets – particularly illiquid investments – could cause cashflow issues. It said 90% of schemes were already cashflow negative, and one in eight FTSE 350 schemes had a cashflow burden above 5% of total assets.UK private sector pension deficit hits two-year highThe combined funding shortfall of UK private sector DB schemes hit £163bn (€182.6bn) at the end August, according to the Pension Protection Fund (PPF), as stock market volatility increased and bond yields fell sharply.According to the PPF’s 7800 Index, which tracks the net funding position of UK DB schemes, the figure marked the biggest deficit recorded since May 2017, when the deficit was £168bn.Total assets increased during August by 1.5%, from £1,730bn to £1,756bn, but aggregate liabilities rose by 5.4%, from £1,821bn to £1,919bn.Data from Mercer released last week showed the aggregate funding position of DB funds linked to FTSE 350 companies declined, from a £51bn deficit to £67bn.Funding position of UK private sector pension schemesChart MakerSion Cole, Head of UK fiduciary business at BlackRock, said: “Whether a scheme is in surplus or deficit will largely have decided how schemes have fared in August.“Generally speaking, better-funded schemes have more hedging and are taking less investment risk so will have coped better with the market turbulence in August. Conversely, their underfunded counterparts who need to chase returns will have been hit hardest.” Nick Reevelast_img read more

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‘Title race not over’ says Chelsea boss Mourinho as Blues go seven-points clear

first_imgChelsea boss Jose Mourinho refused to admit that the Premier League title race is over, saying that he is only focusing on his team’s season run-in.The Blues moved seven-points clear at the top of the table with a 2-1 victory over Stoke City, and while there are just seven matches remaining in the campaign, the Portuguese remained restrained when discussing the destination of the title.“[It brings us] one step closer,” he told talkSPORT. “Now, instead of six victories and a draw, it is five victories and a draw [needed to win the title].“The second, third and fourth-placed teams need to win every game and wait for us to lose a few points. We just need to think about ourselves.”When asked whether reigning champions Manchester City have slipped out of the running, Mourinho was even more defiant, saying: “No, of course not. On Monday, they can be second again. Nobody is out of the title race when mathematics says they are in it, so they are.”While Saturday’s victory brought another three points for Chelsea, it was arguably, Charlie Adam’s stunning long-range goal that stole the headlines and while Mourinho commented that it was ‘amazing’, he took another view of the effort.“Their goal is amazing, but I am not happy with it. Our defensive block was high and the moment we lost the ball we have to know to press the opponent.“We were not good enough in the transition when the ball was lost.“It was a goal that every top player in the world wants to score. He must be happy despite their defeat.”last_img read more

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