The platform solution for CDI strategies

01 December 2019

Laura Catterick Commercial Director

Author

Laura Catterick
Commercial Director

Investment managers have been developing Cashflow-Driven Investment (CDI) strategies to meet DB pension scheme’s need for income paying funds. Laura Catterick discusses the increasing demand to see funds on pension platforms.

Nearly three quarters of the UK’s defined benefit (DB) pension schemes are cashflow negative – and this figure is expected to rise to 90% in the next ten years1. So, it’s no wonder that trustees and their advisers want to be able to access income paying funds which can be used to meet cashflow requirements without selling assets.

Investment managers have been developing Cashflow-Driven Investment (CDI) strategies to meet this need and there is now increasing demand to see these funds on pension platforms.

CDI funds typically hold a range of corporate bonds and gilts of different duration. DB schemes investing in these strategies benefit from contractual income from the bonds. These funds typically follow a buy-and-hold strategy, giving schemes another known source of income on the maturity of the bonds.

DB schemes can hold CDI funds with different maturity dates to meet pension payments to members or blend funds to give a more bespoke solution. Income payments can be made straight into trustees’ bank accounts on a periodic basis. And of course, because no asset is sold, there is no bid/offer spread enabling trustees to receive income without incurring transaction costs.

By holding CDI funds on a pension platform, such as Mobius Life, schemes and their advisers benefit from simplified administration and a single view of all the scheme’s assets. Because investments are pooled on a platform, smaller schemes can easily access CDI strategies, which may be out of reach to them on a stand-alone basis.

Not all platforms have the flexibility to hold CDI funds, but at Mobius Life, because we are fully focused on delivering investment platform services, we are taking steps to make CDI strategies available to schemes of all sizes.

As more and more schemes become cashflow negative, they will be seeking ways to meet their income needs – with the administration handled seamlessly on platform. Mobius Life is ready to help.

  1. Mercer (2019): https://www.pensionspolicyinstitute.org.uk/media/3311/20191029-db-endgame-reportfinal.pdf
-

Mobius Life Limited 7th Floor, 20 Gresham Street, London EC2V 7JE
t: + 44 (0)20 7847 3300 f: + 44 (0)20 7847 3399 w: www.mobiuslife.co.uk
Mobius Life Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Registered in England and Wales at: 7th Floor, 20 Gresham Street, London, EC2V 7JE. Registered No. 3104978. For your security telephone conversations may be recorded.

Latest news

04/07/2023
LDI on platforms – does one size fit all?
There are still a huge number of UK schemes using LDI as an integral part of their investment strategies as DB schemes mature. We currently host over 100 LDI funds on the platform across 5 LDI managers and do not restrict schemes to a narrow portfolio of LDI funds or only to in-house funds.

Read more >

05/06/2023
Mobius Life wins Professional Pensions Institutional Investment Platform Provider of the Year award for fifth successive year.
We are delighted to have won the Professional Pensions Institutional Investment Platform of the Year Award at the UK Pensions Awards 2023. This is an unprecedented fifth year in succession that Mobius has won the award.

Read more >

19/05/2023
Collateral waterfalls for LDI
Mobius Life has introduced automated LDI collateral waterfalls, where our clients nominate in advance which funds will be used to meet future calls and in which order. This means we can automatically use the agreed fund to meet calls without the delay of awaiting instructions.

Read more >

Our cookie policy

Mobius Life collects information during your visit to our website through the use of cookies. We use these cookies for a variety of reasons, most commonly to distinguish you from other visitors and to help us compile aggregate statistics about usage of our website. Read our cookie policy to find out more.