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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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Riot Games to consolidate competitions into singular Latin American league

first_imgRiot Games has announced its plan to consolidate its two current Latin American League of Legends competitions into a singular league – the name of which is yet to be announced.Eight teams will face off in this new league starting in 2019, playing in Santiago de Chile, Riot Games believes the location contains means that are “essential for the future of the scene”. Riot Games originally made a decision in 2016 to segment Latin America into North and South to increase “the relevance, audience and internal of each of the leagues.” As the announcement admits, it didn’t quite work out as expected.As it stands, Riot Games currently operates both the America South Cup (also known as Copa Latinoamérica Sur or CLS) and the Latin America North League (also known as Liga Latinoamérica Norte or LLN). Each league sees eight teams in contention to win, though when the leagues are brought together, there will only be room for eight teams. Riot Games are expected to reveal how these teams will be decided upon in the upcoming days – alongside the competition format and key dates for the league.The announcement explains the decision: “Latin America has a diverse and extremely rich culture, but we believe that esports fans share many similarities across the continent. The way in which an Argentine player passionately enjoys a final is not different from the excitement of a Mexican fan to see his favourite team devote champion, and that is reflected in each and every one of the countries that make up the region. Today we believe that dividing efforts, resources and fans into two scenes that share so much is not the best way.”Esports Insider says: Bringing the competitions together with the best teams from both North and South Latin America regions sounds ideal for providing the most competitive experience. Riot Games tried doing it another way and realised it perhaps wasn’t the best way, so we’re looking forward to seeing what they pull out of the bag for this unnamed league.last_img read more

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