We use cookies to support features like login and allow trusted media partners to analyse aggregated site usage.
To dismiss this message and allow cookies to be used, please click "Continue".



Twitter board

Follow us
  • Friday View: Piecing together the pooling puzzle- DGF Roundtable - Royal Mail names pensions boss -LGPS Central sel… https://t.co/DPfZ3WUv6K2 days ago
  • portfolio institutional is launching a new series on LGPS pooling, tracking changes to investment strategies and up… https://t.co/Ld04PZ2TNK4 days ago
  • Friday View: ESG: What lies beneath? - Industry backs DWP's ESG push - LGPS Central CEO to step down - Railpen hire… https://t.co/S3knBieob09 days ago
  • Out now- The portfolio institutional September issue feat our cover on ESG: What lies beneath? -Interview: Railpe… https://t.co/x9EYxDVXEl13 days ago
  • Friday View: LGPS pool appoints CIO - Jack Dromey on cost reporting - TPR hires former FCA director - NEST issues p… https://t.co/aNVGQqK35Z16 days ago
  • RT @AonRetirementUK: How prepared is your portfolio? Read a write-up of the discussions at our recent event with @portfolio_inst, along wit…18 days ago
  • "Shadow pensions minister Jack Dromey comments on the need to set compulsory standards for cost reporting." Read m… https://t.co/vH1gGZBm1q18 days ago
  • "Border to Coast, a recently launched £46bn public sector pension pool, has appointed Daniel Booth as its chief inv… https://t.co/AlIwikhgli19 days ago
  • Friday View: Spike in shareholder rebellions - Investors ditch GBP funds - Access launches first  pooled fund - GAM… https://t.co/aFzvBWgsmp23 days ago
  • Join us and HarbourVest Partners for breakfast to discover how access to private companies can provide diversificat… https://t.co/JaRlWiziJl23 days ago
  • "Ian Scott tells Mark Dunne about being back on the buy side, hedge funds, self-sufficiency, the trouble with infra… https://t.co/G0UUF9ldSx24 days ago
  • "Aon has developed an ESG rating system for buy-rated investment strategies which is designed to assess whether and… https://t.co/mstoAc3vr325 days ago
  • "With hedge fund performance improving and pension scheme investment increasing, has more institutional backing res… https://t.co/JVcIEXXKwr30 days ago
  • "The infrastructure repair bill is huge and more and more pension funds are willing to step in and plug the funding… https://t.co/zXy2lbpj6K31 days ago
  • "For investors looking to own sustainable businesses, engagement is the new divestment." Read more here:… https://t.co/YiA28qc6BI32 days ago
  • "Thanks to climate change, pension scheme portfolios are in danger of overheating. So what are trustees doing to pr… https://t.co/8gND4lC1OZ33 days ago
  • RT @eVestment: With research claiming that companies with high #ESG standards make better #investments, are sustainable strategies on the v…37 days ago
  • "The revolution in how investors are assessing companies is gaining momentum. No longer considered niche, responsib… https://t.co/uFCHnMlOux37 days ago
  • Friday View: Beyond bonds: The future of LDI - Responsible investing: Just reward - Just buys DB adviser - Ex Railp… https://t.co/1suOFFSprA37 days ago
  • "An increasing number of pension schemes are adopting a more efficient way of investing." Read more in our in-dept… https://t.co/F6Y0e9DB5E37 days ago


Cash-flow driven investing

Cash-flow driven investing

Show me the money

Cash-flow driven investing

For defined benefit (DB) pension schemes the cash-flow forecast does not make good reading.

Research published last year by consultancy Mercer discovered that more than half (55%) of UK DB schemes were not generating enough cash to pay all their members’ pensions. This was up from 42% 12 months earlier and the authors of the report believe that this is set to deteriorate further.

Of the schemes that generated a cash surplus last year, 85% will be cashflow negative by 2027, Mercer believes. Those not earning enough cash from contributions or their investments may have to sell assets to meet their obligations. But is this a concern for trustees? After all, being cash-flow negative comes with the territory for a mature final salary scheme and the  ideal endpoint is to have no members and no assets, so selling assets is part of that journey. The trick is having enough cash to make sure that the last member receives their benefits in full before the last share or bond is sold.

The sell-off in developed market equities at the start of the year highlights why scheme managers could be having a tough time. Those forced to sell are likely to have done so after prices had fallen and will have to turn to the more liquid quality

stocks in their portfolio to raise the cash needed. This could mean losing dividend-paying blue chips. Not an ideal situation for investment portfolios to be in.

Strategies to protect portfolios from not having enough liquidity to pay benefits and avoid having to sell at the wrong time in the cycle include keeping cash in the portfolio. This may not be popular with some so an alternative protection strategy could be to hedge with swaps.

Transfer values are another issue that trustees have to navigate, which just adds to the uncertainty that makes it difficult to know how much cash a scheme needs and when.

Insurance is another element that has increased in importance for pension schemes. This year more than one commentator has predicted a record year for risk transactions with insurers, a result of favourable pricing.

With cash-flow investing rising in prominence we crammed trustees, pension funds, asset managers, consultants and other advisers around a table to discuss some of the biggest issues with the strategy.

Kindly sponsored by:

If you are interested to participate in one of our future roundtable discussions please contact us for further details.

John Waterson
Head of sales UK
T: +44 20 78228567

Friday View

Friday View

Shareholder engagement: