For winners of the Risk.net Buy-Side Awards, it was a difficult year to stay out of politics. For some, big political shocks have created opportunities – ICI's pension fund and the reinsurance arm of Prudential Financial, are examples. Others such as hedge fund manager Cheyne Capital and insurer Rothesay Life have benefited from slower but equally forceful changes.
The first such shock was the UK's vote to leave the EU, and ICI wins the award for pension fund of the year for its ultra-fast buy-in immediately after the June referendum.
In a sign of how pension de-risking is changing, ICI's fund closed a £750 million ($940 million) transaction within eight working days of the vote. Widening credit spreads opened the door for Legal & General, on the other side, to back the liabilities with cheapened corporate bonds, shaving about £10 million off the cost of the deal.
Critically, ICI had lined up master contracts with L&G and other potential counterparties to make just such a transaction possible. "We know the appetite of the insurers to do a transaction, and we can grab that opportunity before others get to it," Heath Mottram, the fund's chief executive, says.
Prudential Financial, as reinsurer, took on L&G's longevity risk from the buy-in. Again execution was super-fast: the deal was done just two weeks from the completion of the original transaction. This looks to be the template for the future, with Solvency II creating an acute need for reinsurance to be ready when big pensions buy-ins are agreed.
Also around the referendum, buy-side risk solutions house of the year – Societe Generale, which also won Risk.net's award for best bank for asset managers – put on €1 billion ($1.1 billion) of hedges in notional terms, a large chunk of the €5 billion worth of Brexit hedges that banks facilitated. SG devised option trades to cut the price of hedging for asset managers – in one case by up to 70%.
Other winners capitalised on less-sudden changes.
Cheyne Capital, winner of the hedge fund manager award, looked to fill a gap opened by government cuts to social housing development. The manager's Social Property Impact Fund seeks to build and lease properties for disadvantaged groups, creating inflation-linked cashflows to suit the requirements of pension investors at a time when hedging with inflation swaps is coming under pressure. It's a £60 billion opportunity, the firm believes.
Meanwhile, insurer of the year, Rothesay Life, wins for its purchase of the annuity back book of Aegon UK – another example of how regulation is changing the landscape for buy-siders. Such deals are a win-win under Solvency II, as annuities become more capital-intensive and require careful management under the directive's matching adjustment.
For a firm doing that already, a legacy book is good business. For an insurer wishing to focus elsewhere, it is a drain on capital they might wish to avoid.
In other awards, Vanguard is named asset management risk manager of the year for the overhaul of its risk framework as the firm continues forays into active management. AB wins innovation of the year for its aggregation platform for bond market pricing and liquidity information.
And Dario Villani and Santhanam Nagarajan of Tudor Investment Corporation, and Kharen Musaelian of HiQu Capital are named as Risk.net's buy-side quants of the year for their work on a new – more practical – way to measure risk in the rates curve.
Congratulations to all of this year's winners:
Risk solutions awards