Fly fishing and the art of rebalancing pension assets

01 February 2018

Craig Brown Institutional Distribution Director

Author

Craig Brown
Institutional Distribution Director

Craig Brown explains why rebalancing a pension scheme portfolio to aim to take risk off the table can be a bit like fly fishing. It requires patience and the ability to strike fast when the opportunity arises.

Rebalancing a pension scheme portfolio to aim to take risk off the table can be a bit like fly fishing. It requires patience and the ability to strike fast when the opportunity arises.

Patience is required because, like waiting for the perfect trout, the right market conditions do not materialise every day. The ability to move fast is also essential because a window of opportunity, like our fish, may disappear as quickly as it appears.

There are many different approaches. Some funds rebalance at regular intervals, often quarterly, but many UK consultants also favour the use of funding level triggers. For example, where the funding increases to a set level, switches are triggered which typically decrease the growth portfolio and increase the liability hedge.

The process of rebalancing is easy in theory but can be tricky in practice. Some funds need to be sold, others bought, incurring cost and complexity and there is always the risk that fund prices may move against the fund when it is out of the market.

That’s one reason why many consultants advise their clients to use the Mobius Life platform. We make the rebalancing process quick and straightforward.

We monitor fund values and trigger points , reporting electronically to our clients, so they know exactly when to rebalance. And the process of rebalancing is straightforward too. Using our platform, funds can be automatically switched and out of market risk greatly reduced.

So, with the rebalancing sorted, that leaves more time by the river. J R Hartley would be delighted.

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