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Paternoster sees “gamesmanship” in buyout market

UK - Mark Wood, the chief executive of defined benefit pensions buyout firm Paternoster, reckons there's "gamesmanship" going on in the market as providers seek to win business.

There was "internecine" competition between providers, Wood said in a lecture at the Cass Business School last night.

Wood said Paternoster had had a transfer volume of £2.5bn-£3bn in 2005 which he predicted would be increase many times this year.

There was a £16bn "pipeline" on which it had quoted on £6bn.

Wood said DB pensions would be an anachronism in five to 10 years, and that taking them off balance sheet was similar to other business outsourcing decisions.

He explained that Paternoster makes its money by managing assets efficiently. Assets would likely be Public Finance Initiative issues and Collateralised Debt Obligations. The firm was "very unlikely to have a material long term equity exposure".

Stressing the long-term nature of the industry, he pointed out that Paternoster's backers, including Deutsche Bank, have no right to claim a dividend in the first five years.

And he called on dominant players Legal & General and Prudential, where he was formerly UK CEO, to take their own DB pension funds off balance sheet.

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