(August, 6 2013) — The Investment Management Association (IMA) has disputed claims that asset managers offering liability-driven investment (LDI) saw a fall in the level of pension fund obligations hedged by the strategies in 2012.
In its annual survey, which was published today, the IMA said companies offering the strategies reported assets to be down by 5% in to 2012 to hit just £302 billion. These assets included third-party and in-house mandates.
The numbers sit at odds with the IMA noting a trend towards the strategies. It said: “Last year we reported on-going growth in LDI mandates in the context of increasing ‘limits of specialisation’ within the asset management industry and a continued shift away from component manufacture towards solution provision.”
To explain the apparent juxtaposition, the IMA said the figures reported from LDI providers should be “treated with care” due to different reporting methodologies amongst the firms.
Instead, it preferred to offer industry estimates—attributed to KPMG—which said the figures had increased from £403 billion in 2011 to £446 billion by the end of last year, driven by a rise in the overall number of mandates.
LDI providers have bemoaned the on-going low interest rate environment that has turned investors against taking decisive action to lock in their liabilities at current levels.
However, the IMA said the industry retained the view that LDI was the best option anyone had come up with to tackle unfunded pension liabilities and a tough economic environment.
Around a third of UK pension fund mandates were given over to LDI strategies by the end of last year, a similar number to a year earlier. Insurance company mandates to the strategies grew to around 10% from less than 8% in 2011.
Corporate clients also increased the level of LDI mandates awarded to asset managers, but these remained at very low levels.
The LDI sector is a very small community in the UK, the survey said, with just three providers looking after 96% of business. The other nine have been fighting it out for just £17.8 billion.
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