South Yorkshire Pensions Authority (SYPA) has confirmed a £2.6bn equity risk management deal in a bid to protect the scheme against the effects of a potential decline in equity markets.
The deal, which is has been co/developed by Schroder’s Portfolio Solutions team in collaboration with SYPA’s investment consultant Mercer, is based on a put spread collar approach, which combines holding the underlying stock with buying proective puts and selling call options.
The SYPA fund, which as of March 2018 managed around £8bn in assets, has appointed Schroders to set up a bespoke pooled fund for its equity strategy.
George Graham, fund director of the South Yorkshire Pensions Authority, comments:“The rise in equity markets in recent years presents South Yorkshire, in common with many pension funds, with a new set of challenges to reduce the risk of negative market impacts while maintaining a focus on growth. This solution helps us achieve this in a cost effective and transparent way.”
As of March 2018, the SZPA fund had £4.1bn invested in equities, having slightly reduced its exposure compared to the previous year, when it had £4.68bn invested in the asset class. In turn, the fund has significantly increased its exposure to Index-Linked Securities (from £900m to £220m yoy) and to pooled investment vehicles (from £631m to £1.65bn yoy).
