The Weekly Wrap: June 14 edition

Record improvement in UK pension fund fortunes

FT: Liabilities of UK pension schemes have fallen by more than £71bn in recent weeks due to rising bond yields. This “is the biggest month-on-month improvement in the aggregate funding position since these numbers were first calculated in 2005,” said Joanne Shepard, senior consultant at Towers Watson. The Pension Protection Fund noted changes in liabilities can have a greater impact than changes in asset prices.

Volatility in bond markets prompts return of the MAC strategy

FTfm: Interest in multi-asset credit strategies has increased among pension schemes worried about the impact of rising interest rates on bond portfolios. Multi-asset credit funds invest dynamically across the entire credit spectrum, which includes high-yield bonds, leveraged loans, mortgage and asset-backed securities, emerging market debt and distressed debt.    

Payment delay will cause havoc for hundreds of thousands of pensioners

Investors Chronicle: A new HM Revenue & Customs tax regime, which requires companies to count monthly payments from the sixth day of the month, could result in hundreds of thousands of pensioners being paid late. The one-off delay will affect pensioners who currently receive pensions in the first five days of the month. John Lewis has informed its 25,000 pensioners there will be a 12-day delay in receiving their November pension.

Use of derivatives spurs liability hedging

MandateWire: Inflows into liability-driven investment topped £3bn in the first quarter of 2013, an increase over the previous two quarters. This has led to an increase in the use of derivatives due to low gilt yields. “Schemes are becoming more comfortable and are moving more in this direction because to hedge a significant exposure of interest rate and inflation rate risk, [schemes] need to start using derivatives,” said Mercer's Phil Edwards.

Emerging market assets suffer in fierce sell-off

FT: Rising concerns of the prospect of the end of quantitative easing in the United States led to a sell-off of emerging market assets. This sharp correction was also caused by signs that China’s economy is slowing down. Emerging market fund managers were hit hard from investor redemptions.

Most read on pensionsweek.com

BT joins with unions to win back 83% of opt-outs
How draft contribution rules impact your scheme
The key steps to the best annuity for your members
Heineken boosts transparency with statement of investment principles
Now Pensions U-turns on sharia fund for members

This week's social media comment

In response to our case study on BT's auto-enrolment experience, Christine Brightwell posted in our LinkedIn group: "Maybe the later 'bombarding' after people have been enrolled will help to engage some of them and dissuade them from opting out."