Schroders completes LBTH risk management strategy
December 6, 2018

Schroders has announced the completion of a £700 million risk management solution for the London Borough of Tower Hamlets (LBTH) Pension Fund.

Schroders' Portfolio Solutions team worked in partnership with LBTH to efficiently design and execute an equity risk management strategy before the end of September, a move which stood LBTH in a robust position ahead of the market volatility experienced in October and November.

This follows the firm's completion of a†£2.6 billion equity risk†management strategy for the South Yorkshire Pensions Authority (SYPA), understood to be one of the largest of its type undertaken in the Local Government Pension Scheme space, earlier this year.†

Schroders says the move delivers a low-governance and capital efficient solution for LBTH, designed to ensure that it is better placed to protect its funding position and meet its employers' and members' requirements through to its next formal actuarial valuation.†

Neville Murton, Acting Corporate Director for Resources, London Borough of Tower Hamlets, commented: "This investment strategy provides more certainty around the outcome of the March 31 2019 formal actuarial valuation and protects against the risk of a significant fall in equities given increased volatility in markets and concerns regarding stretched valuations.††

"LBTH's funding level has improved materially since the last valuation, so the fund implemented the equity protection strategy from a position of relative strength.† The strategy implementation was just in time to lock in high market levels before the recent market fall; therefore the strategy is in a good position to deliver additional savings."

Schroders says the design and creation of a custom-made pooled fund by it minimized LBTH's administrative and governance requirements, while also maximizing the strategy's speed to market.†

Schroders worked in partnership with the pension fund and its consultant Mercer to replicate the exposures of LBTH's growth portfolio, while also releasing capital to be used as collateral for the equity risk management strategy.††

This maintained the pension fund's exposure to potential upside gains, while also mitigating downside risk. The structure of this equity replication was also designed with the aim of minimizing LBTH's trading costs.





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Schroders has announced the completion of a £700 million risk management solution for the London Borough of Tower Hamlets (LBTH) Pension Fund.

Schroders' Portfolio Solutions team worked in partnership with LBTH to efficiently design and execute an equity risk management strategy before the end of September, a move which stood LBTH in a robust position ahead of the market volatility experienced in October and November.

This follows the firm's completion of a†£2.6 billion equity risk†management strategy for the South Yorkshire Pensions Authority (SYPA), understood to be one of the largest of its type undertaken in the Local Government Pension Scheme space, earlier this year.†

Schroders says the move delivers a low-governance and capital efficient solution for LBTH, designed to ensure that it is better placed to protect its funding position and meet its employers' and members' requirements through to its next formal actuarial valuation.†

Neville Murton, Acting Corporate Director for Resources, London Borough of Tower Hamlets, commented: "This investment strategy provides more certainty around the outcome of the March 31 2019 formal actuarial valuation and protects against the risk of a significant fall in equities given increased volatility in markets and concerns regarding stretched valuations.††

"LBTH's funding level has improved materially since the last valuation, so the fund implemented the equity protection strategy from a position of relative strength.† The strategy implementation was just in time to lock in high market levels before the recent market fall; therefore the strategy is in a good position to deliver additional savings."

Schroders says the design and creation of a custom-made pooled fund by it minimized LBTH's administrative and governance requirements, while also maximizing the strategy's speed to market.†

Schroders worked in partnership with the pension fund and its consultant Mercer to replicate the exposures of LBTH's growth portfolio, while also releasing capital to be used as collateral for the equity risk management strategy.††

This maintained the pension fund's exposure to potential upside gains, while also mitigating downside risk. The structure of this equity replication was also designed with the aim of minimizing LBTH's trading costs.



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