Asset management hedging strategies will need flexibility to overcome uncertainty around timing, argues Dan Barnes.
Matching pension fund liabilities is a Sisyphean task, but
low interest rates make the boulder bigger and the slope
steeper. Central banks in Europe, the US and UK are all
expected to raise rates in early 2015, if not sooner.
Although this will make things easier in the long term, the
period in which the boulder changes size and the slope alters
its pitch will be tricky to balance.
The ?exibility that new interest rate derivatives can o?er
may help pension funds better hedge their liabilities during
this period of upheaval.
"We are coming towards a tipping point in the market and
the interest rate change may prove to be the fulcrum," says
VJ Angelo, president and managing director at Global Markets
"There are many drains on resources, changes in
regulation, technology and infrastructure, which have not
allowed ?rms to concentrate on making money. The interest
rate has been very steady, and so activity around that has
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