UK - Amelia Fawcett, former vice chairman of Morgan Stanley's European business, has set up a new company claiming to completely immunise defined benefit (DB) pension schemes from risk.
PensionsFirst, launched today, says it has developed a new range of investment products that can hedge DB schemes' exposure to market risks, as well as scheme-specific longevity and inflation risks.
These offerings will entice company sponsors to retain their DB pension schemes, according to Timothy Lyons, a former banker at Credit Suisse First Boston and Salomon Brothers, founder of the independent asset manager Quadrant Capital and now managing partner at this new company.
Lyons told IPE DB pension schemes seeking financial stability today either have the option to go down the buyout route, which is essentially "inflexible and expensive" he argues, or they can opt for liability-driven investments (LDI), which eliminates market risk, "but do not deal with longevity risk, unless you go for the buyout option".
According to Lyons, PensionsFirst will be the first company to offer a product which is specifically tailored to the risk-appetite and the resources of the pension scheme.
Amelia Fawcett, who last year sailed across the Atlantic to raise money for breast cancer research, said in a statement: "Our initiative introduces scaleable debt capital to the DB market for the first time, providing flexibility and cost efficiency to the management of DB risk.
"Our products, which have global application, will be capable of immunising all DB exposures including longevity, on a scheme specific basis," she added.
The company is attempting to patent the idea of creating bonds which reflect longevity and is also in talks with a number of "strategic partners" looking to form partnerships with banks, to help sell them in other countries, including the US, Japan, Canada and Holland.
PensionsFirst has employed just 20 staff initially, outsourcing its accounting and back office functions.
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