Category: DB

Secure income assets: new opportunities for a new decade

DB (defined benefit) pension schemes are progressing along their journey to end-game, with many becoming increasingly cashflow negative and struggling to balance competing requirements for returns and cashflow.

We believe some key advantages of investing in secure income assets are: • Diversification, e.g. credit (issuer, sector, sub-sector, rating) and structure • Potentially, better protection in downturns than alternative asset classes • Increased certainty of cash flow distribution • Social and environmental purpose • Potential Solvency II matching adjustment eligibility

In this environment we believe that the cashflows, diversification and return-generating nature of secure income assets could be a significant opportunity for DB pension schemes.

Deciding an appropriate asset allocation can be challenging, with traditional asset and liability management ('ALM') frameworks struggling to incorporate all the relevant factors when choosing between illiquid assets.

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