Taking the long view

As structured products makers try to figure out how best to solve asset-liability management problems faced by life and pensions companies, two completely different approaches have emerged. The market has yet to decide which is best, but even if a consensus is reached, there is no guarantee that institutional players will be interested

Since the start of the decade, pension schemes in most developed countries have become caught between several rocks and hard places. Crashing equity markets combined with falling interest rates led to large gaps between pension plan assets and liabilities, the former eating away at the asset base and the latter increasing the mark-to-market price of the liabilities. In the very long run this should not have mattered for portfolios largely exposed to equities and with long-dated liabilities, but