Cash flow driven investing
Cash flow driven investing (CDI) has the objective of helping pension schemes pay future pensioners benefits efficiently, using a combination of asset classes, both liquid and illiquid, that pay contractual cashflows. Corporate bonds (or ‘credit’) satisfy many of the pre-requisites for reliable cashflow generation strategy. They offer a predictable cashflow profile with no floating payments, along with duration exposure and a premium over government bonds. This, in addition to their relatively liquid and flexible nature, forms a compelling argument for pension schemes to look to corporate bonds as the main building block of their cashflow driven strategy. With credit as its cornerstone, CDI solutions can then be complemented by other satellite elements such as real assets or illiquid credit.
Customising solutions to your needs
Our CDI approach aims to meet pension schemes’ needs for intelligent, cost-effective ways to help secure their members’ benefits; providing a flexible, capital-efficient approach for managing pension payments and balance sheet volatility.
We firmly believe that the core component of any cashflow delivery strategy should be a Buy and Maintain investment grade credit solution, as it can provide customisable, safe and predictable cashflows to pension schemes in order to meet pensioners’ benefits. Therefore, we consider our strength as a Buy and Maintain provider to be a key factor in our CDI capability.
Buy and Maintain Credit at the heart of our solutions
At the core of our CDI solutions is our long-term Buy and Maintain credit approach. A fundamentals-based, investment grade credit solution with built-in Environmental, Social and Governance (ESG) factor analysis, it aims to maximise the security of clients’ future cashflows through:
- Capital preservation – avoiding defaults and impairments
- Predictability – delivery of cashflows over the long term
- Credit returns – maximising the premium over euro swap rate
Heritage in liability management
The CDI strategy is a natural extension of our longstanding experience in managing Buy and Maintain type portfolios as a result of our insurance heritage, incorporating bottom-up credit analysis, proactive intervention, risk management and capital requirements management, in combination with our LDI capabilities. As a result of the strategy’s insurance heritage, we take a long-term, ESG integrated approach, with a heavy emphasis on protecting against downside risks, thereby minimising the risk of impairments. The CDI strategy also benefits from global insights, leveraging the best ideas and local market knowledge from our wider Buy and Maintain investment team, split across Zurich, London, Paris and Greenwich (US).
26 insights found
Why short duration Asian bonds could be a flexible and well-timed play on market uncertainty?
COVID-19 has shaken up high yield and put opportunities on the table
The asset class is always prepared for a crisis, but the uneven impact of the virus means fundamental credit analysis is more important than ever
Fixed income opportunities: Positioning for the next wave of bond market volatility
Bond markets have enjoyed a strong run recently, with yields moving close to and in some cases reaching all-time lows in July, but we believe there are potentially further gains to come - despite the ...