We believe that pension schemes can better align their assets and liabilities with a buy-and-maintain approach to credit investing. This approach helps investors avoid the usual pitfalls of benchmark investing by reducing transaction costs and reinvestment risks.
Long-term investors can benefit from the extensive experience we’ve gained from managing Aviva’s annuity book and our detailed understanding of managing pension fund assets, including $24 billion of buy-and-maintain credit strategies.1
This more focused approach to managing credit makes it ideal for long-term investors such as pension schemes and insurance companies. It is an ideal building block for a portfolio with a long-term outlook and complements other strategies focused on growth, alternative income and liability driven investment.
The benefits of buy-and-maintain include:
- Lower turnover.
- Lower transaction costs.
- Lower reinvestment risk.
- Focus on absolute credit risk.
- Cash flow generation.
We can deliver a broad range of tailored credit strategies to meet each client’s specific objectives and requirements. They can complement traditional fixed income mandates or form part of a wider liability-aware strategy.
Why buy-and-maintain credit?
Our buy-and-maintain credit framework allows for:
- Fundamental differences between an annuity client and pension scheme.
- Flexibility to meet a wide range of pension scheme requirements.
- Individual parameters and reporting requirements for each scheme.
For pension schemes our buy-and-maintain credit strategy can offer:
- A better alignment of a scheme’s assets with its liabilities
- Expected returns in line with funding requirements
- Reduced reinvestment risks and reduced transaction costs compared to a traditional benchmarked approach.
Detailed investment process
Portfolio managers and credit analysts work together to identify defensive credits. This involves:
- Determining a range of investable credits for the mandate.
- Identifying investment opportunities.
- Portfolio construction.
- Implementation and then regular monitoring of portfolios.
1 As at 31 March 2015
The value of an investment and any income from it may go down as well as up and the investor may not get back the original amount invested.