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Paternoster CEO outlines “keys to success”

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UK - Mark Wood, chief executive of Paternoster, has outlined what he terms the keys to the success of the new breed of pension buyout firms.

Wood is the former UK CEO of Prudential whose new company is among those seeking to buy out defined benefit pension funds.

He said: "Longevity risk and the risk of default on bonds held within a matched pension portfolio are by far the largest risks a pension fund runs.

"In assuming responsibility for the obligations of a pension scheme, we and the other new entrants to the market are preoccupied with ensuring that we completely understand all probable outcomes."

In a letter to the Financial Times, Wood stated: "At Paternoster, we achieve this by studying in great detail the mortality profile of each member of an individual pension scheme, by developing a bond-by-bond assessment of the credit risk-adjusted return, and making maximum use of the full range of long-dated asset classes available.

"This, together with the benefits of aggregating administration for individual schemes and more efficient deployment of capital, are the keys to the success for the new breed of pension specialists entering the market."

Elsewhere, insurance firm Aegon has said it expects to close its first pensions buy out deal by the first quarter of 2007, according to a report in Global Pensions.

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