Cornwall steps into the LDI arena

The £1.2 billion Cornwall Pension Fund has awarded a £50 million liability-driven investment (LDI) mandate to AXA Investment Managers (AXA IM).

Cornwall is among the first local authority pension funds to take up LDI, which has been widely used in the corporate sector as a means of reducing investment volatility and more closely linking fund assets to liabilities, through the use of bonds and swaps to mirror liabilities and reduce exposure to inflation and interest rate risks.

Cornwall deputy head of pensions and treasury, Matthew Trebilcock said: “We decided to incorporate an LDI solution within our overall investment strategy in order to reduce the impact of volatility on council taxpayers and on long-term contribution rates.” JLT Investment Consulting senior consultant Julian Brown, added: “While a large number of private pension funds have turned to LDI as a means of de-risking, to date we have only seen a small number of public sector funds adopting this practice. This approach should help the Cornwall Pension Fund to reduce funding volatility and thereby provide greater future security.”

AXA IM local authority business development manager, Tracey Milner, said: “We are pleased and excited to be embarking on what we hope will be a long and productive partnership. This is an important first for both the Cornwall Pension Fund, and everyone in the UK institutional team at AXA IM. As part of the AXA Group, we have considerable experience in constructing and implementing LDI strategies, and we are keen to use this expertise to partner with UK pension schemes to help them manage funding level and contribution volatility.”