Trustees should negotiate extra safeguards from bulk annuity providers following the near collapse of AIG, according to Watson Wyatt.

Phew. What are the lessons of last week then? I can point in the direction of quite a few dotted around the magazine. In our governance pages, Tom Powdrill of PIRC quotes Stephen Green of HSBC as saying that the short-term focus on profits and the way in which remuneration in financial services firms is geared to motivate has to be redesigned.

“While equities offer good value at current levels, we do not believe investors are being compensated sufficiently for the risk that remains, and the write-downs that will continue to emerge.”
Paul Niven, head of asset allocation, F&C

There is more bad news to come on equities, pension funds have been warned by investment experts.

However, opinion is mixed on whether pension funds should seek to cut their equity exposure or hold firm in the expectation of a recovery in 2009.

A cap on pensions for Legal & General staff has coincided with an equity report from the group that highlights UK employees’ unease about strike action.

The buyout of HBOS by Lloyds TSB could see the creation of the largest segregated fund manager in the UK.

“We would expect new recovery plans to reflect current economic conditions in terms of what is reasonably affordable. For existing plans, our scheme funding code of practice states that trustees should consider reviewing plans where there is a significant improvement or decline in the employer’s covenant.”

The Pensions Regulator

Only one in five employers (19%) carried out risk assessments of their defined contribution (DC) schemes in the last year, according to research from Watson Wyatt.

Schemes will start buying longevity insurance by the end of the year, according to a buyout firm, heralding a new chapter in the risk transfer market.

The Pensions Trust, the multi-employer occupational pension scheme for the not-for-profit sector, has insured a chunk of its pensioner liabilities with Paternoster.

Prudent liability-driven investing (LDI) remains “essential” for UK pension funds despite the fallout from Lehman’s collapse, according to investment experts.

Current market volatility will increase the appetite for liability driven investment (LDI) strategies, not decrease it, Aon Consulting has stated.

“This reinforces the view that if it sounds too good to be true, or if you don’t understand it – don’t buy it! I never had much of an appetite for such products.”

Watson Wyatt stands to lose from its own advice after it recommended the appointment of a chief investment officer (CIO) at the Barclays pension fund.

Standard Life has vowed not to sell on its pension products through new acquisition Vebnet.

In Q4, pensioners were calculated to have suffered a bigger jump in living and housing costs than most other households, according to the ONS.

Investment consultant Gissings is increasingly favouring absolute return strategies for its clients.

Exchange traded fund (ETF) platforms provided a rare investment ray of light in the days following Lehman’s collapse.

Fiduciary management specialist Cardano has beefed up its private equity knowledge by poaching a private equity fund-of-funds manager.

Anna Dayn joins from Capital Dynamics, where she was part of a team that managed $20bn of fund-of-fund products.

Analysis: Although pension providers say they have been waiting for years for protected rights to be permitted in Sipps, will the market really change that much as a result, asks Charlie Kirby.

When employees are members of a final salary occupational pension scheme run by their employer, it is the employer who is taking all the risks. From the employees’ point of view, they get the benefit of knowing exactly what pension they will become entitled to when they retire; it is a fixed percentage of their final salary.

It’s a politically unacceptable solution and is already financially challenging, with estimations it could add £40bn to the government deficit. By Amarendra Swarup.

Beta

Beta is an estimate of how much an individual stock will move given a change in the overall level of its market. Beta is also the name given to the return from any portfolio or stock which is the result of it being part of a particular market, such as equities or bonds.

In the marketplace for DC schemes, a group Sipp could provide the true flexibility employees have been looking for. By Jonathan Watts-Lay.

Banks and insurers are dropping like flies, but what does this mean for markets and investors, asks Tom Powdrill.

Annual corporate governance seminar:

Welcome to hard times

November 4, 2008

By weekday, Horacio Valeiras is a high-flying CIO at Allianz Global Investment subsidiary Nicholas-Applegate Capital Management, but when he’s able to escape the office, he takes to the skies in his own private airplane.

Following the demise of several banks last week, David Rowley asks trustees how much confidence they have in swaps and derivatives.

Axa Investment Managers (Axa IM) has named Theo Zemek (pic) to lead its fixed income division, which has been restructured to enhance performance and exploit evolving markets.

Hermes has appointed Kees Verbaas (pic) as executive director of emerging markets equities as part of its evolution into a multi boutique investment firm.

BDO Stoy Hayward has appointed Neil Fung-On (pic) as a partner to develop its specialist investment management and funds team.

Nick Flint (pic) has been named chief executive of Club Vita, Hymans Robertson’s pensions longevity project, to drive its development forward.