FTFM UK pension funds looking to manage the interest rate and inflation risks to their liabilities and match assets to cash flow are increasingly making use of the derivatives market to do so. But setting up bespoke swap arrangements with investment banks requires a large governance budget, making it difficult for medium- and smaller-sized schemes to make use of the strategy.
That prompted the introduction of pooled swaps funds, with State Street Global Advisors launching the first such funds in January 2005, closely followed by BGI in March the same year. About 10 other providers have since joined the market, with JPMorgan Asset Management the most recent entrant.
