3. February 2013 Press Kit - For Journalist Use Only 3
What We’re Doing
Extending the Credit Universe
We have helped several clients diversify out of conventional corporate credit to other sources of credit
exposure, increasing expected returns without compromising risk. Examples include the use of alpha-
oriented and “Go Anywhere” flexible mandates as well as illiquid credit assets like leveraged loans. See
also “Opportunities in Illiquid Credit” in the next section.
For further information: Pete Drewienkiewicz, David Bennett, Mark Herne, Neha Bhargava
Accessing Infrastructure Debt
Infrastructure is now well on the pension industry’s radar. Attractive opportunities in infrastructure debt
currently exist because banks are under significant pressure to reduce their holdings in this asset class.
We are working with clients and the wider industry to develop opportunities ideally suited for schemes.
For further information: Conrad Holmboe
Using Swaptions in an LDI Framework
Swaptions allow schemes to establish protection against falling interest rates while maintaining the
potential to benefit from a rising rate environment. A number of clients have taken advantage of and
implemented swaption strategies, allowing them to hedge interest rate risk at more palatable levels.
For further information: David Bennett, Dan Mikulskis, Pete Drewienkiewicz
Reviewing LDI Mandates
LDI is one of the most important and longstanding topics on pension schemes’ agendas, yet many of
them are using out-dated LDI mandates. This can lead to excessive risk in scheme portfolios, inability to
take advantage of market opportunities, inefficient liability control and a lack of transparency.
For further information: Pete Drewienkiewicz, Kenny Nicoll, Tom McCartan
Preparing for EMIR
Our recent survey of pension stakeholders revealed the majority felt unprepared for the implications of
EMIR. Asset allocation, risk management and LDI strategies (including collateral management) will be
affected but client work shows the costs, benefits and decisions will differ across individual schemes.
For further information: Tom McCartan, Kenny Nicoll, Pete Drewienkiewicz, Freddie Ewer
Incorporating Sponsor Metrics into Scheme Risk Frameworks
The risk imposed by DB schemes on their corporate sponsor is under ever greater scrutiny by rating
agencies, lending banks, investors and the PPF. We are working with trustees to measure and react to
this risk and with sponsor clients to help them effectively manage it via risk management frameworks.
For further information: Karen Heaven
4. 4 Press Kit - For Journalist Use Only February 2013
Launching RedSTART
A financial literacy and entrepreneurship education programme for young people. RedSTART has held
two education sessions to date, with ten more planned for 2013. The feedback from pupils and their
teachers has been very encouraging. We are currently looking for partners to expand the programme
across the UK. Topics covered include investments, credit, entrepreneurship and, of course, pensions.
For further information: Freddie Ewer, Jonathan Letham or visit the website - redstart.redington.co.uk
What We’re Thinking
Risk-Controlled Investment Strategies
Volatility Control, Risk Parity and Equity Replacement strategies demonstrate how a risk-focused basis
for investment can lead to more consistent and superior risk-adjusted returns for pension schemes. We
have been researching how risk-controlled strategies can be used by DB and DC schemes to produce
better risk-adjusted returns, as well as advising a number of clients on specific allocations to these
strategies.
For further information: Dan Mikulskis, Aniket Das, Patrick O’Sullivan
Alternative Benchmarks and Indices
More and more we see an acceptance that a traditional active or passive market-capitalization
weighted approach is not the most effective way for pension funds to access the various risk premia
that exist in global markets.
For further information: Dan Mikulskis, Steven Yang Yu
Solution to Guarantee DC Pension Pots
We believe many of the risk management approaches we advocate in DB pension scheme investing
can be applied to DC. Compared to traditional DC approaches, these approaches can give the member
a similar final outcome, but with much smaller fluctuations in the value of the DC pension pot along the
way.
For further information: Dan Mikulskis, Patrick O’Sullivan
Opportunities in Illiquid Credit
In a low yield environment with deleveraging by banks, many schemes are ideally placed to benefit from
excess returns from illiquid credit, such as leveraged loans, commercial real estate debt, PF2 loans and
direct lending to smaller companies.
For further information: Pete Drewienkiewicz, David Bennett, Mark Herne, Conrad Holmboe
5. February 2013 Press Kit - For Journalist Use Only 5
Inflation Risk – Improving Calculations and Reactions
UK pension scheme liabilities are generally linked to inflation subject to caps and floors. This presents
a challenge when trying to hedge this liability with instruments linked purely to inflation. Historically a
range of different models have been used to tackle this problem, and the choice of model can have a
large impact on the inflation sensitivity of a pension scheme's liabilities. This is not something that is
always well understood by pension scheme trustees and yet it wields significant influence over the
investment strategy.
For further information: Dan Mikulskis, Steven Yang Yu
Low Bond Yields ≠Low Bond Returns
An upcoming RedViews shows that low-yielding government bonds can still produce attractive returns in
a low-to-lower yield environment. “Carry” is an important driver of both bond returns and the value of
liabilities over time. Regulations will also play a significant, influencing the demand for safe assets.
For further information: John Towner, Mark Herne, David Bennett
Expanding Inflation-Linked Asset Opportunities
Inflation remains a key risk to DB schemes, yet the size of inflation-linked bond markets hampers their
ability to hedge. We are working with the wider industry to find a solution to this issue, for example, by
improving the ability of utility companies to issue inflation-linked debt.
For further information: John Towner
Smoothing is No Pensions’ Panacea
In response to the DWP consultation on discount rate smoothing, Redington put forward that smoothing
discount rates for assets and liabilities may well end up creating more problems than it seeks to solve.
For further information: Karen Heaven, Mark Herne, Dan Mikulskis
Stay In Touch
Redingtonpins
Redington
@RedSTART
educate
@RedBlogTweets@redingtontweets
redstart
.redington
.co.uk
blog.redington
.co.uk
redington.co.uk
6. 6 Press Kit - For Journalist Use Only February 2013
Spokespeople Contact Details
Robert Gardner
Co-Founder & Co-CEO
robert.gardner@redington.co.uk 020 7250 3416
Dawid Konotey-Ahulu
Co-Founder & Co-CEO
dawid@redington.co.uk 020 7250 3415
David Bennett
Managing Director, Investment Consulting
david.bennett@redington.co.uk 020 3326 7147
Mark Herne
Managing Director, Investment Consulting
mark.herne@redington.co.uk 020 3326 7107
John Towner
Director, Investment Consulting
john.towner@redington.co.uk 020 3326 7143
Pete Drewienkiewicz
Director, Head of Manager Research
pete.drewienkiewicz@redington.co.uk 020 3326 7138
Dan Mikulskis
Director, ALM & Investment Strategy
dan.mikulskis@redington.co.uk 020 3326 7129
Steven Yang Yu
Director, ALM & Investment Strategy
steven.yangyu@redington.co.uk 020 3326 7118
7. February 2013 Press Kit - For Journalist Use Only 7
Kenny Nicoll
Director, Manager Research Team
kenny.nicoll@redington.co.uk 020 3326 7134
Karen Heaven
Vice President, Investment Consulting
karen.heaven@redington.co.uk 020 3326 7134
Patrick O’Sullivan
Vice President, Investment Consulting
patrick.osullivan@redington.co.uk 020 3326 7104
Neha Bhargava
Vice President, Investment Consulting
neha.bhargava@redington.co.uk 020 3326 7105
Conrad Holmboe
Associate, Investment Consulting
conrad.holmboe@redington.co.uk 020 3326 7142
Tom McCartan
Associate, Manager Research
tom.mccartan@redington.co.uk 020 3326 7139
Aniket Das
Associate, Manager Research
aniket.das@redington.co.uk 020 3326 7153
Freddie Ewer
Analyst, Investment Consulting
freddie.ewer@redington.co.uk 020 3326 7133
Jonathan Letham
Analyst, ALM & Investment Strategy
jonathan.letham@redington.co.uk 020 3326 7108
8. 8 Press Kit - For Journalist Use Only February 2013
Keep Up To Date
If you wish to subscribe, please visit www.redington.co.uk/publications.aspx and fill in your details, or
simply send an email to communications@redington.co.uk.
Keeping clients informed
RedViews
Ad hoc white papers based on current hot topics and forward looking
thoughts – recent topics include: RPI to CPI, EMIR, Volatility Control
strategies, Inflation-linked bonds, Moving from a Dirty to Clean CSA.
RedVision
Weekly summary of market moves and news related to equity, credit,
interest rate and inflation markets and roundup of latest pensions
news.
Commenting on industry developments
RedBlog
Blogs related to pensions, markets and economics by Redington and
guest authors. Recent topics include: Smoothing, Equity Risk
Premium, EMIR, RPI/CPI, RedSTART and Romanian horses.
Outline
Quarterly collection of ten short, topical articles featuring key themes
for institutional investors as they seek to measure and manage risk-
adjusted returns.
Creating opportunities for pension funds
Asset Class
Annual update of new opportunities and developments related to
‘Flight Plan Consistent Assets’ – liability-matching assets with
attractive, secure and inflation-linked cashflows.
Risk-Adjusted Return
Quarterly update of risk-adjusted performance across asset classes
for the past one, three and five years, ranked using their Sharpe
Ratio. Covers credit, equity, risk parity, hedge funds and
commodities.