Innocap launches first liability-driven investment product for pension funds
Innocap, subsidiary of National Bank of Canada, announces the launch of its new Liability Driven Investment (LDI) product that generates, net of fee a return equivalent to the inflation index plus 2% to 4%.
A majority of pension funds now have to mark to market their liabilities instead of using a fixed discount rate. This has heightened pension funds' board awareness to their real challenge: interest rates and inflation. Innocap's LDI product has been developed to meet these challenges.
Innocap's LDI product is designed specifically for pension funds. 'We don't have a standardized solution - we work with investors and their advisors to meet their individual requirements,' explains Martin Gagnon, Managing Director, Innocap Investments.
Innocap's LDI product can be rebalanced on a monthly basis to reflect the changing nature of global pension plans' liabilities. Together with the pension fund, Innocap will determine the fund's nominal liabilities, and then Innocap creates a fixed income proxy portfolio that will bridge the pension fund's asset mix shortfall in terms of duration.
'We have run simulations using our LDI product, and we have found that our product is an excellent proxy for real return bonds, generating attractive inflation plus returns, with excellent liquidity,' adds Denis Parisien, Managing Director, Innocap Investments.
Innocap's LDI product is focusing on global pension funds to create customized solutions that meet investor's requirements.
Background note: Innocap Investment Management act as National Bank's asset manager for its alternative investment activities. Innocap currently manages USD 1.7 billion in hedge fund mandates, through a unique managed account platform. Innocap's managed Funds provide their investors with monthly liquidity upon a 10 days notice and daily NAV reporting (Bloomberg). Innocap's platform of managed accounts increase the user's control over assets since all accounts at the prime brokers, future clearers, counterparties and bank accounts are opened in the name of Innocap's managed Funds. This structure allows for the complete ownership of positions; no money is invested directly in the managers' hedge fund. Innocap's managed Funds resemble multi strategy hedge fund, with the flexibility of a fund of hedge funds platform in seeking the best managers.
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