PPF: We are ready for whatever comes our way

Back in 2016 we took the decision to insource part of our investment capability in an attempt to initiate the next phase of our evolution and embark on a new period of growth. By taking investment in-house, we would have more control over our assets, responding to market movements faster than ever before, and we would have a greater influence over investment performance.

Bringing LDI in-house provides a strong foundation on which we want to build even further. We also plan to insource cash, FX and credit

This project is now complete and we have been reaping the rewards of our efforts ever since.

So, what have we done to get to this point?

When we first started out, I was tasked with ‘reimagining what perfect looks like’.

We have undertaken some major changes, such as re-engineering all of the key processes around the liability-driven investment activity and our interactions with the actuarial liability function, operations teams and others such as the accounting, legal and performance teams.

We have also been able to replace many of our routine, previously manual, processes with automated functions. This change alone has seen time consuming administrative tasks happening instantly and allowing us to be more productive. For example, our benchmark is now automated, letting us react very quickly to any changes in hedging requirement.

Reaping the rewards

It has been a huge project, but we are seeing the benefits of our work. It has increased the speed at which we are able to efficiently respond to market movements. We rely on external functions less now; also, facing the market directly has enabled us to build strong relationships with our counterparties, meaning we can take advantage of market opportunities and react quickly in the event of a major market shift.

All of this will be crucial as our assets get larger and, in turn, the risks get bigger.

Overall, the PPF has seen its predicted margin of success rise and the levy is continuing to fall, which is good news for levy payers.

What’s next?

Bringing LDI in-house provides a strong foundation on which we want to build even further. As we look to the future, we can continue to focus on utilising our capital more effectively to the benefit of our members and levy payers.

We also plan to insource other functions – including cash, FX and credit. This process will be more streamlined now that we have done the groundwork and seen the rewards that it can reap.

While we continue to operate in a challenging market, we are in a good place, and we are ready to take on whatever comes our way. 

Trevor Welsh is head of liability-driven investment at the PPF