Fixed Income
Bitesized bonds: catch up on fixed income in under three minutes
Each month brings a new, easily digestible instalment. Catch up on all things fixed income in under three minutes.
Capital backed funding arrangements (CBFA) can offer tangible benefits in alternative risk transfer, as defined benefit (DB) pension schemes look towards securing member benefits in full. But what exactly are they, and how can their benefits and risks be assessed?
CBFAs can offer tangible benefits for defined benefit pension schemes to secure member benefits in full: reducing downside investment risk, covenant improvement, access to investment expertise, governance arrangements and potentially assistance to prepare for an insurance buyout or a low dependency strategy.
Arrangements offer distinct benefits when compared with DIY approaches, superfunds, DB master trusts and conventional insurance risk transfer policies.
However, there are new risks to consider and this remains a relatively new area with limited standardisation or information in the public domain. It is important to understand how an arrangement works both in the normal course of events, in periods of stress and if the arrangement is terminated.
In this paper – published by the Institute and Faculty of Actuaries¹ and co-authored by Invesco portfolio manager Derek Steeden – you will find a framework to allow an effective initial comparison, assessment and discussion of these arrangements. We hope it helps pension schemes to identify appropriate next steps.
Bitesized bonds: catch up on fixed income in under three minutes
Each month brings a new, easily digestible instalment. Catch up on all things fixed income in under three minutes.
Monthly fixed income update
Fixed income markets in July saw yields rally in response to weaker economic data which brought forward expectations of rate cuts. Read our latest thoughts on how fixed income markets performed during the month and what we think you should be looking out for in the near term.
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¹ Institute and Faculty of Actuaries, www.actuaries.org.uk
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