Barclays Global Investors Ltd (BGI) has launched a new suite of sixteen pooled Liability Driven Investment (LDI) funds.<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:office:office" />
This new product suite, called BGI Liability Solutions Funds (<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Dublin), complements the first suite launched earlier this year in March, and increases the scope to achieve additional performance as well as matching liabilities.
The product set comprises three groups of pooled funds:
- Sterling-denominated -- four sterling-denominated funds also allow investors to employ out-performance strategies relative to their liabilities. By buying a return-seeking fund alongside the liability fund, investors can implement a liability plus strategy. Investors have shown a growing interest in these strategies.
- Sterling and Euro Diversified Credit -- two diversified credit funds allowing investors to generate returns from corporate bonds that have low correlation with equities, hence improving the amount of return they can achieve for a given risk level.
- Euro-denominated -- ten Euro-denominated funds which allow pension funds with Euro-denominated liabilities to employ out-performance strategies while hedging their interest rate and inflation risks through an easy to use pooled fund structure.
These three groups of pooled funds offer pension funds comprehensive and highly flexible risk management and investment tools. Within the framework of the BGI Liability Solutions Funds (Dublin), pension schemes will be able to create bespoke portfolio solutions, which provide interest rate and inflation sensitivity more in line with their liabilities while at the same time allowing schemes to spend risk to achieve the best return for that risk.
"We are already managing over GBP 2bn of liability mandates in pooled funds, a clear indication that these products have struck a chord with investors," said BGI Managing Director, Hugh Cutler. "In recognition of the fact that on the face of it, LDI solutions appear to be quite complex, we have already run a series of very successful educational forums with clients and in September we will be hosting a series of LDI workshops around the country."
BGI Ltd has offered LDI solutions to pension funds on a segregated basis for five years, and now manage a total of GBP 16bn in LDI mandates.
"BGI's quantitative approach to investing is a natural fit when managing LDI solutions -- our clients find that very reassuring," said Tarik Ben-Saud, Head of LDI Solutions at BGI.