EUROPE - Aegon Asset Management has launched a customised asset allocation facility to help pension schemes meet their strategic objectives through hedging.
The service uses derivatives and other financial instruments to provide pension funds with a bespoke overlay to actively protect against downside risk and optimise upside opportunities.
The Asset Allocation Service (AAS) has actually been available for approximately a year, but the company is now promoting it to its entire European client base.
The service is open to all pension funds, although officials say it is only suited to schemes with more than €300m in assets under management because of its fee structure.
Scott Jamieson, European head of multi-asset investing, Aegon Asset Management, described the service as a discretionary risk mitigation programme.
"Typically, schemes don't manage their asset allocation round a strategic benchmark," he says. "Most of the performance is dictated by asset allocation but it is only recently that pension schemes have been willing to spend a quantum of time focusing on this, rather than on manager failings."
He claimed the earlier long-running bull market, prior to the credit crunch, has, ironically, tempered pension funds' ability to seek out beta.
"People got out of the habit of making changes because during the bull market, it had been wrong to change things," he said. "In fact, over the longer term, pension funds should be managing their asset allocation on a personalised basis."
AAS is designed to tilt the mix of assets in the strategic benchmark according to the general behaviour of economies and markets. Adjustments to this tilt are intended to be occasional, though the actual frequency varies according to market conditions.
Aegon said the underlying strategies deliver the most cost-effective hedging of risk available, although they will often not be the most obvious ones to use. Furthermore, they are designed to deliver a payback commensurate with the extent of any setback.
Jamieson claimed the recent market turmoil has given the product's appeal a boost.
"Clearly a service which enhances market governance is always going to find favour during a time when markets are misbehaving," he argued.
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