Last quarter, UK Defined Benefit (DB) scheme funding continued to improve, rising to 111% on average.1
The sharp increase in interest rates caused assets to fall 5% but liabilities to fall further, by 9%. Overall, 37% of schemes remain in deficit.1
In our latest DB pensions update we share our views on:
- The de-risking journey for DB pension plans
- Global market conditions and factors influencing a Cashflow-Driven Investing strategy
- The Q2 outlook key public debt and alternative income asset classes
“Alternative income provides the opportunity for higher yields than investment grade credit, but without the same volatility of capital values associated with equities. This can enable some de-risking without adversely affecting the pension scheme’s liability discount rate.”2
1 Source: Pension Protection Fund (PPF S179 basis), as of March 31, 2022.
2 Source: Invesco as of March 31, 2022.
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Alternative investment products, including private equity, may involve a higher degree of risk, may engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be highly illiquid, may not be required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual portfolios, often charge higher fees which may offset any trading profits, and in many cases the underlying investments are not transparent and are known only to the investment manager. There is often no secondary market for private equity interests, and none is expected to develop. There may be restrictions on transferring interests in such investments.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.