UK - PensionsFirst, the recently-launched company which claims to completely immunise defined benefit (DB) schemes from risk, is now planning the launch of two separate offices in the US and Japan.
Timothy Lyons, co-founder and a former banker at Credit Suisse First Boston and Salomon Brothers, told IPE in an interview PensionsFirst ‘buy-in' solution is not just a UK product, but has global application.
"We will be launching products in the US and Japan," he said, adding PensionsFirst is also planning to recruit staff in those countries and set up offices. That said, no other offices are planned for Europe.
Moreover, the company says to have "three transactions north of £1bn (€1.25bn) in the pipeline", and the company expects to close its first piece of business at the end of the third quarter or some time in the forth quarter of 2008.
"We are pricing transactions at the moment, with a view to being able to go firm on the bidding process, but the gestation process of initially discussing and closing the deal is several months. We are looking at around 15 schemes now with the average size of about £1bn," said Lyons.
PensionsFirst currently focuses on larger pension schemes, from £100m onwards, though in the last quarter this year plans to launch a similar solution for small schemes.
Under its 'buy-in' process, the company enables a pension scheme to subscribe for a bond and the proceeds of that bond are invested in a separate asset company - a segregated asset pool for each fund - while longevity exposure of all schemes would be combined in one pool.
Lyons outlined the company will use the same technology for smaller schemes, though will co-mingle the schemes' assets to make a collective, "because the economics of scale simply don't allow you to offer a bespoke solution like this for a very small scheme".
He added PensionsFirst is not only in discussions with pension funds, but also with insurers, since the company claims to have created a platform to transfer risk to the capital markets, which can be the risk for pension schemes and for insurers.
"If you talk to the insurers, you find that a number of them are already acknowledging they will have to recycle their risks into the capital markets. We are not just talking to pension schemes about using this model, but also to insurers," he told IPE.
Asked why no deal had yet been closed, Lyons outlined the company was forced to launch prematurely after news leaked last November that Amelia Fawcett, the former vice chairman of Morgan Stanley's European business, had joined the firm.
"We are just coming to the end of the rating process, so we expect to announce the formal ratings of our products in the near future, which will formalise the methodology and products we will be offering to the market," he said, adding the company did not expect to close any business before the formal rating had been completed.
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