Q&A - Robert Gardner

Under pressure to improve transparency, pension schemes are increasingly seeking to manage deficit/surplus volatility. The co-founder of consultancy Redington Partners in London explains how credit can play a part in that drive

Q: What are the major risks that pension fund managers have in their portfolios?

A: A defined benefit pension scheme has two major parts: the liabilities, and the assets that back those liabilities. The major risks inherent in the liabilities are interest rates, inflation and longevity assumptions. On the asset side, the principal risk is equities, typically with a high concentration in domestic equities. The rest of the portfolio is typically invested in bonds (government and corporate) and in