Buy-side firms ditching swaps for loans

Insurers and pension funds are developing a taste for infrastructure loans and other long-dated assets, and abandoning traditional, swap-based hedges

One of the reasons why over-the-counter derivatives exist, so the textbooks will tell you, is to transfer risk to a more suitable home. In reality, things are a little more complicated. Take the example of infrastructure loans and other long-dated financing. Borrowers would habitually use derivatives to hedge their interest rate exposure, but because these swaps were lucrative, banks often treated the business as a package – offering the loan cheaply in the hope of winning the accompanying swap