Whoever accused big companies of not being entrepreneurial has obviously never seen a large investment bank beavering away at a business opportunity. One of their richer seams in recent years has been the pensions industry – and the capital markets’ most tantalising challenge right now is finding an affordable way to manage longevity risk.
Pension fund assets and liabilities are vast – $19,600bn in defined benefit liabilities worldwide, by some measures – so it is not surprising that investment banks want to be involved. An early way in was through so-called ‘transition management’ – helping pension funds to rebalance their investment portfolios away from the heavy equity bias that characterised the 1980s and much of the 1990s.
