In February 2021 Financial Investigator hosted a LDI & Balance Sheet Management Roundtable. Jan Willem van Stuijvenberg was one of the participants and very much enjoyed the discussions on this always interesting and evolving topic.
The questions covered at the roundtable:
- Should balance sheet management and LDI be provided by one party?
- Should one hedge currency risk inside the LDI mandate or at a total fund level?
- What are the pros and cons of a ‘fund for one’ vs a ‘segregated account’?
- Does it pay out to be active in LDI using government bonds, SSA’s etc.?
- What possibilities are there to incorporate green investing / ESG in LDI?
- The scope of instruments that are used in LDI is widening. How to cope with this?
- For central clearing are pension funds willing to expand towards LCH?
- How does one cope with the increasing demand for cash collateral and the possible drag on performance?
- How will the ‘New Pension Contract’ impact LDI and is anticipation needed?
- In the ‘New Pension Contract’ one will work with age groups. Is it truly logical to increase the rates hedge with age?
- Over 2021 / 2024 the regulatory UFR discount curve will change. How to cope with these changes in relation to the upcoming ‘New Pension Contract’?
- Should (long) government bonds be a natural part of an LDI portfolio?
- What is your outlook on the shape and level of the swap curve?
Jan Willem van Stuijvenberg
Mercer and Van Stuijvenberg Financial Services prolong their cooperation on pensionfund balance sheet management and interest rate hedging solutions for 3 years. The cooperation started in 2006 when Mercer acquired licences for the risk and LDI tools of van Stuijvenberg Financial Services. Together they further developed the tools and for the future the ongoing development will play a key role.
Over the last 11 years Mercer advised more than 40 pensionfunds with total assets over €150 billion. Risk and LDI tools were essential in doing so. The ongoing development kept us up to par with the continuously changing environment. The continuation of this joint development is an important part of the contract that was signed. To stress the structural relationship the contract has a maturity of 3 years with the intention to prolong.
A solid setup and an effective monitoring of the interest rate hedge is key for pensionfunds.
In the prolonged cooperation van Stuijvenberg Financial Services will be responsible for the ongoing development of tooling. Van Stuijvenberg Financial Services will also support the Mercer consultants. The focus for this support will be on risk and LDI issues.
Karin Roeloffs, the head of Mercer Investments Netherlands: “For Dutch pensionfunds a solid setup and an effective monitoring of the interest rate hedge is key. We have been working on risk and LDI with van Stuijvenberg Financial Services for eleven years now. This cooperation has added clear value for our clients and that is what we will continue to do for the years to come. Van Stuijvenberg Financial Services has elaborate knowledge and experience in LDI and has proven to develop very useful risk and LDI applications.”
Jan Willem van Stuijvenberg, owner and founder of van Stuijvenberg Financial Services: “Mercer is a very professional and pleasant party to work with. We work together for 11 years now and achieved a lot. Working with the Mercer consultants is very valuable to me. The feedback and suggestions they give help me making better applications. I think that supporting the consultants on risk and LDI while at the same time developing and improving the applications they use is very efficient. I look forward to add value and work with Mercer for another 3 years.”
Mercer is a global leading provider of advisory services on Health, Wealth en Career. The Mercer consultants support their clients on complex issues. These can be related to working conditions and benefits, human capital, health plans and insurance, social security and pensions. In 43 countries over 20,000 people work for Mercer. Mercer is wholly owned subsidiary of MMC. Also Marsh en Oliver Wyman are part of MMC.