Pension funds snub swaps over margin demand

Liabilities now being matched with bonds or property, says AllianceBernstein


Some pension funds are turning their backs on swap markets, citing the vast amounts of cash collateral that might be needed to support mandatory central clearing – the "unknown enemy" according to Erik Vynckier, chief investment officer at asset manager AllianceBernstein.

Many funds use long-dated fixed-rate-receiver swaps to hedge their liabilities, which will slide out-of-the-money as interest rates rise. That would produce calls for variation margin running into the billions of dollars – some

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