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Case study

Securing good yields in a low return environment

Investment Pensions & benefits

How we helped a mature DB scheme de-risk while maintaining the necessary return to maintain funding levels.

The background

The client is a mature DB scheme with a well diversified investment portfolio. Their Funding Proposal required further de-risking of their assets wile maintaining an overall return of 3.0% p.a. They had a strong employer covenant with a commitment to meeting the required contribution rate under the Funding Proposal.

The Trustees of the Scheme, along with LCP as its investment advisers, were faced with the challenge of keeping the overall expected return in line with that assumed in the Funding Proposal while continuing to increase it's liability matching asset allocation. 

Our solution

We proposed that the Trustees explore less liquid investment opportunities in light of the strong Employer covenant. The use of these assets did not increase investment risk, but they did have a low correlation with the other assets in the portfolio.

Our experts were able to give clear advice to Trustees about preferred managers, negotiate reduced fees for the client, and deliver pragmatic advice on the process of the asset transfer during the switch period. 

The results

The client was able to invest its funds with two additional managers, increasing it's liability matching assets while being able to maintain the scheme's required rate of return. 

We were able to ensure that the asset switches were handled smoothly and were completed in good time. This meant a minimum of disruption to the scheme, and along with the reduction in fees meant that the cost impact to the scheme was also minimal.