UK - Cardano’s £4bn solvency management portfolios outperformed traditional investment approaches by around 15% over the two years to 30 June, while reducing portfolio risk at the same time, the company said.
Solvency management is a form of fiduciary management that involves managing pension fund assets against liabilities in a risk-controlled way.
Ralph Frank, head of solutions at Cardano UK, said: “Improving funding ratios is a long-term game, but our focus on strong performance, with low levels of risk relative to liabilities, is already delivering results for our clients.”
Cardano assumes an asset allocation for a traditional portfolio of 70% equities, 20% bonds and 10% property.
It attributes the outperformance of its solvency management portfolios to the poor performance of these asset classes in 2008, as well as the way in which the company rotates clients’ asset allocations across different asset classes and investment funds.
Richard Dowell, Cardano head of clients, said: “We are able to be more active on where we believe the best value is for our clients.
“Looking back into 2008-09, the risk/reward for corporate bonds and other credit-related assets was more attractive than equities because they sit higher on the balance sheet, and we moved out of equities into credit.
“It’s those sorts of decisions we can make in a portfolio because we are trying to outperform [clients’] liabilities at all times rather than a traditional asset allocation benchmark.”
Cardano could turn around a portfolio’s asset allocation within days, having agreed investment parameters with trustees at the outset, he said.
UK industry pension liabilities have soared 20% over the last two years due to very low interest rates, but Cardano has halved the level of risk against its clients’ liabilities, he said.
“Three or four years ago, the general thought about de-risking was that it always meant cutting return, but it doesn’t,” he added.
“It’s all about building a more efficient portfolio.”