Pension funds use more derivatives but shun CDOs


Pension funds are increasingly turning to derivatives to exploit risk, says a new report from consultancy Watson Wyatt. In its Global Investment Review, Roger Urwin, global head of investment consulting, reports that the use of derivatives in pension portfolios is growing as the instruments become more accepted. “As well as neutralising risk, derivatives can make risk-taking more efficient,” he says.

Apart from taking on credit risk via credit default swaps, pension fund managers are applying

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