Pension Corporation are one of the larger firms which was established to take on assets and liabilities from pension funds and manage those through to the end of a pensions lifespan. As a result they take on significant assets from pension funds which need to be invested in a prudent manner to ensure pension liabilities can be met. So it’s no surprise to find out that they have an allocation to insurance-linked securities among their alternative investment strategies.
This interview in (aiCIO magazine) with Co-Head of Asset-Liability Management at Pension Corporation Mark Gull, discusses how they manage their investment strategy at Pension Corporation. They are responsible for around $4.7 billion in assets and as a result the retirement income of 55,000 pensioners and members. Gull explains that when looking at alternatives, Pension Corporation seek genuine alternatives which are uncorrelated and so don’t move up and down in line with the rest of their portfolio.
One of these uncorrelated asset classes that Pension Corporation make an allocation to is insurance-linked securities. They do this by outsourcing this small allocation to a third-party manager.
Gull explains that their investment strategy is a long-game as they have liabilities which stretch at least 70 years. So they are risk averse as well and if their outsource investment managers take any undue risks they will likely be reigned in pretty quickly.
Insurance-linked securities and catastrophe bonds are increasingly appearing in the investment manager news, which shows that their profile is still growing and is also encouraging as it means asset managers will increasingly become familiar and more comfortable with them. It’s not surprising that investors as large as Pension Corporation outsource their allocations to asset classes like ILS, but it is encouraging that they seek specialist help for a lot of our readers in the ILS investment space.