Inflation - the overlooked risk?








Dan Banks This email address is being protected from spambots. You need JavaScript enabled to view it.




If my pension scheme has a high level of inflation hedging, it is protected against the risk of adverse movements in inflation, correct? Not exactly. Read on to find out why.

For a long time, inflation has been the lesser discussed cousin of interest rate risk when considering liability hedging for pension schemes (or liability-driven investment, “LDI”). However, recent interventions from the House of Lords means this may no longer be the case.

The benefits which a scheme’s members receive are often linked to inflation. As such, when inflation rises, the benefits payable will increase as will the value placed on these liabilities by the scheme actuary. This creates inflation risk. For the last 20 years, inflation expectations have generally been quite stable. So, inflation has appeared to represent a lower risk than interest rates.

Recently, the House of Lords has been calling for reform of the calculation of inflation. Any change to RPI requires consent from the Chancellor up to 2030. The Chancellor has rejected the request to either discontinue the publication of RPI or more closely align it with CPI. However, the Chancellor will publicly consult on whether changes to RPI should be made sometime between 2025 and 2030 (source: Letter to the Chairman of the Economic Affairs Committee 4 September 2019)

A change in RPI could expose defined benefit pension schemes to a higher risk of underperforming their liabilities, exposing a funding gap. Whilst this event might feel like a long time away, the market has already starting pricing-in the possibility of RPI being lower in the future.

The level of risk depends on scheme specifics: the amount and type of inflation linkage, how much of this is hedged using LDI, and the inflation assumptions used in the scheme actuary’s funding basis.

It is therefore important for trustees to understand how much inflation risk is inherent in their defined benefit pension scheme. We believe that a proportional approach should be taken in the context of other risks that the trustees are facing.

As a result, trustees should engage with their investment consultant, LDI provider and scheme actuary to understand the risks and monitor them on an ongoing basis in light of legislative developments.

Introduction

Typically, trustee meeting discussions about liability hedging have often been focused around interest rate hedging. In reality, this makes perfect sense given interest rates (government bond yields) have been the biggest driver of the rise in the value of pension scheme liabilities and deficits over the last ten years.

The chart below shows how long-term expectations of interest rates and inflation (as measured by RPI) have changed over the last 20 years.

Long-term interest rate expectations have fallen by almost 4%, pushing up the value of liability estimates to eye watering levels. Meanwhile, inflation has bobbed and weaved between 2% and 4% and, over the last few years, has been very stable. This could lead one to believe rising inflation does not present a significant risk to the funding of defined benefit pension schemes.

Now, let’s look further back into the past and consider annual changes in inflation. The chart below shows inflation fell from a high of 23% in 1976 down to less than 5% in the ’90s. What's going on here? If we had assumed levels of inflation in the ’70s and ’80s would continue into the ’90s, ’00s and beyond then scheme actuaries would have made a major forecasting error.

Why has recent inflation been so stable?

To understand if there is inflation risk on the horizon, we need to understand what impacts market expectations of inflation. Furthermore, why was there such a shift from high and volatile inflation pre ’90s to the stable variety we have witnessed more recently?

The fundamental reason is that in 1998 the Bank of England (BoE) was given responsibility for monetary policy and an explicit target to control inflation. Initially, that target was 2.5% for the retail price index (RPI) moving to the consumer price index (CPI) at 2% in 2003.

This target has an anchoring effect on expectations for long-term inflation levels. If, for example, inflation goes above target, you would reasonably expect the BoE to raise interest rates to counteract this (and vice-versa when inflation is low). Given inflation is really now the output of monetary policy this means the risk over the long-term (the period pension schemes care about) is less about inflation getting out of hand and more about the government deciding to make a change to its “inflation mandate”.

Isn’t inflation hard to measure?

There is no “definitive” measure for inflation as everyone experiences different levels of inflation as part of their daily lives. Ultimately, your experience of inflation depends on what you purchase, where you purchase it and what you own. That said, the most common and widely accepted measure of inflation is the CPI. CPI aims to capture a broad measure of inflation for the UK and is calculated in a similar way to measures used in the EU. As part of the calculation process of CPI, approximately 180,000 products are priced each month – no small feat.

As many trustees will be aware, the other major measure of inflation is the retail price index (RPI). RPI had its status as a national index revoked in 2013 with the UK Statistics Authority (UKSA) advocating against its use. Despite its unpopularity with statisticians, it is still used in many areas such as uprating government bonds and corporate bonds, student loan interest rates, rail fare increases, and air passenger duty. More significant for trustees is that increases in pension scheme benefits, both accrued and prospective, may be linked to RPI.

The key differences between RPI and CPI are the way which they are calculated and that RPI includes the cost of housing. We have shown below how CPI and RPI have varied over time. Although CPI is generally lower than RPI, this is not always the case. For example, in 2008 CPI was above RPI as housing costs fell markedly due to lower interest rates.

The House of Lords report

Part of the reason why readers may have seen more press coverage on inflation recently is due to the House of Lords publishing its report on ‘Measuring Inflation’ in January 2019. This report looked at how inflation was measured in the UK and concluded that it was unacceptable for the government to use multiple measures of inflation.

RPI has a major issue related to a change in calculation methodology made in 2010. This caused the gap between RPI and CPI to widen further. That said, the impact on the calculation of RPI has created winners and losers. It was estimated that at the time of the change the UK government had to pay roughly £1bn p.a. extra interest to the holders of RPI-linked government bonds . This is clearly good news for those bond holders, which included many pension schemes. On the other hand, students and commuters have lost out as annual rail fare increases, and student loan interest payments, are also linked to RPI.

The House of Lords Committee raised concerns that the increasing divergence between RPI and CPI encouraged the UK government to ‘index shop’. As a result, benefits, tax thresholds as well as public sector and state pensions were all switched from being uprated by the higher RPI to the lower CPI in 2011. To reduce confusion and prevent index shopping, the House of Lords report calls for a single measure of inflation to be agreed. In the meantime, the report proposes the government switch from RPI to CPI in all areas (except private contracts). This includes issuing new gilts which would be linked to CPI rather than RPI.

One might think fixing the calculation of RPI to be a simple task given the UKSA’s understanding of the issues. However, the UKSA have told the House of Lords the change would require the consent of the Chancellor, who has indicated that these changes are not on the agenda until at least 2025-2030. Despite this, members of Parliament have called on the UKSA to publish a proposal to rectify the shortcomings of RPI. The lack of action from the UKSA has stoked concerns about its independence from the government, so much so that some are calling for the UKSA to be split in two.

Ultimately, if the calculation of RPI is changed, or its use as an index is discontinued, this has implications for pension schemes on both the asset and liability side of the balance sheet.


But my scheme doesn’t have inflation risk – does it?

There are broadly three types of inflation risk which defined benefit pension schemes are exposed to:

Implied inflation risk

All schemes will have at least some benefits linked to inflation, such that when inflation rises the size of the benefit paid increases. This risk will emerge each year as inflation changes. For example, RPI increased by 2.7% over 2018 and as such you would have expected most inflation-linked benefits to increase by the same amount.

Actuaries need to make an estimate of how benefits will increase into the future. Your scheme actuary will use estimates of inflation from assets like index-linked gilts and inflation swaps (derivative contracts designed to move in line with future inflation expectations). If this “implied” inflation rises, then it will lead to a higher expected level of benefits payable in the future and consequently a higher value of the liabilities for funding purposes.

Implied inflation risk is one that can be managed by holding inflation-linked instruments such as index-linked gilts and inflation swaps. These assets can therefore be tailored to the inflation exposure within the scheme’s liabilities as well as the trustees’ desired level of risk management.

Caps and floors

For many I imagine the first thought is that having caps and floors on pension scheme benefits is a good protection mechanism for a scheme; for example, if inflation were to rise significantly this would not be fully reflected through to the underlying benefit payable.

The most common type is a 0% floor and a 5% cap. This effectively means that you can never reduce a member’s pension (because of the 0% floor) and you do not need to increase a pension by any more than 5% over a given 12-month period (even if inflation is above 5%).

The risk that caps and floors present is due to the way which the inflation exposure in these liabilities is hedged. Today, nearly all pension schemes which hedge inflation risk use instruments which do not have any caps or floors, e.g. RPI linked gilts or RPI swaps. So, the principle risk is that the value of your gilts or swaps falls by more than your liabilities, because those instruments don’t have a built-in floor. For example, if you own an index-linked gilt and inflation falls to -0.5%, your gilt will fall in value, but your liabilities will not fall any further than the impact of inflation at 0%.

A good LDI strategy should therefore involve monitoring the impact of caps and floors and adjusting the hedge on an ongoing basis.

RPI to CPI “gap” risk

Evidence presented to the House of Lords estimated c.15% of private-sector liabilities are linked to CPI. The issue pension schemes face today is that there are very few CPI linked instruments to directly hedge their CPI inflation risk. As a result most schemes link the CPI liabilities to RPI by describing them as RPI less a number and then hedge the inflation risk by buying RPI linked assets. In doing so, this creates a risk that the gap between RPI and CPI suddenly closes due to legislative changes. Let’s use an example to show how this could occur:

Consider a pension scheme which has a benefit payable in 20 years’ time that is based on CPI increases.

  • In order to estimate the impact of CPI, the actuary assumes that CPI is 1% less than RPI./li>
  • The actuary calculates an implied RPI from index-linked gilts at 3.5% p.a. over the 20 year period, so their assumption for CPI is 2.5% p.a.

The scheme’s LDI manager then chooses to hedge the CPI risk, using RPI linked instruments.

  • This makes sense as, if RPI falls, the scheme’s estimated CPI increases will also fall as they are linked by a simple deduction of 1%./li>
  • The risk, however, is that the government (or someone else) decrees a change to RPI in that it will now be 0.5% closer to CPI.
  • Under this scenario, the RPI linked assets will fall in value but the CPI benefits will not have changed. As a result, the scheme has just opened up an additional deficit.

To put this risk in context, let’s look at a £200m scheme with 75% of its liabilities linked to CPI, and this is fully hedged with RPI linked assets. If the gap between RPI and CPI falls by 0.5% then this could imply an increase in the deficit of c.£15m, no small amount.

This risk is material, illustrated by the market’s response when the Chancellor recently commented that he will consult on closing the gap between RPI and CPI around 2030. Upon the release of that statement, longer dated RPI expectations have fallen by c.0.10%. This move only prices in a fraction of the gap, representing the uncertainty over whether closing the gap will materialise. Should further indications arise that this is likely to transpire, markets will start pricing in the change more materially.

Whilst the current Chancellor has stated he will not act on this issue in the next ten years, regimes change and so do agendas and priorities. For example, we don’t yet know where this would rank among the fiscal priorities of a future prime minister or government.

Overall the RPI/CPI gap risk is not one that is easily managed through liability hedging due to a lack of CPI linked instruments. That said, if we were to see the issuance of more CPI linked instruments, which the House of Lords report is suggesting, this would enable schemes to reduce their RPI/CPI gap risk. In the meantime, trustees should monitor the risk and ensure their assumption for the gap between CPI and RPI remains appropriate.

What should my scheme be doing today?

It’s important to understand how much inflation risk is inherent in the scheme. This will allow trustees to decide how much time should be spent addressing and governing this risk.

Trustees should speak to their scheme actuary, investment consultant and LDI provider to find answers to the following questions:

1. Understanding implied inflation risk

  • What is the total proportion of liabilities which are linked to RPI and CPI? /li>
  • What proportion of the inflation-linked liabilities are being hedged?
  • What impact would a 0.5% increase in inflation have on the deficit?

2. Managing impact of caps and floors

  • How often does your LDI manager adjust the portfolio to allow for the impact of inflation risks on the caps and floors? /li>
  • What is the residual risk?

3. Measuring RPI to CPI “gap” risk

  • What is the current assumption used as the gap between RPI and CPI?/li>
  • What would be the impact on the deficit if the gap were to drop by 0.5% or 1.0%?

4. Bringing it all together

  • How do each of the inflation risks outlined above compare to the other risks which the scheme is running?/li>
  • Can the covenant support the level of inflation risk?
  • Is the level of prudence in the scheme’s inflation assumptions sufficient?/li>
  • Does the current level of inflation hedging remain appropriate?
  • Should the trustees be actively monitoring inflation risk on a more regular basis?/li>
  • How should inflation risk be documented in the risk register?
Final thoughts...

Inflation has likely not been a defined benefit scheme’s biggest concern over the last ten years, but good risk management isn’t about looking backwards. It’s about looking forwards. We aren’t saying every scheme needs to suddenly have a plan in place to manage, in particular, the RPI to CPI gap risk. However, asking the questions outlined above will enable trustees to work out how much time to commit to this. The best risk management isn’t just about looking forwards – it’s about deciding which risks to spend time on.


Measuring Inflation - House of Lords document



Please note that all material within this communication is produced by River and Mercantile Solutions and is directed at, and intended for, the consideration of Professional clients only. This document constitutes a financial promotion within the meaning of the Financial Services and Markets Act 2000 ("FSMA"). Retail clients must not place any reliance upon the contents.

The information expressed has been provided in good faith and has been prepared using sources considered to be reliable and appropriate. While this information from third parties is believed to be reliable, no representations, guarantees or warranties are made as to the accuracy of information presented, and no responsibility or liability can be accepted for any error, omission or inaccuracy in respect of this. This document may also include our views and expectations, which cannot be taken as fact.

The value of investments and any income generated may go down as well as up and is not guaranteed. An investor may not get back the amount originally invested. Past performance is not a guide to future performance. Changes in exchange rates may have an adverse effect on the value, price or income of investments.

A Spectrum of Delegation

Note 1: “River and Mercantile Solutions returns” represents the aggregated returns of the return seeking assets, including liability hedging solutions, of the set of our fiduciary management clients that have comparable investment strategies.

Note 2: Some figures are affected by rounding.

Note 3: For the avoidance of doubt, 22% is the amount which annualised River and Mercantile Solutions returns have outperformed annualised equity returns between January 2004 and March 2009, and 24% is the amount by which annualised River and Mercantile Solutions returns have outperformed annualised equity returns between October 2007 and November 2016.

Source: River and Mercantile Solutions, Bloomberg

Best DB Consultancy 2016

20 May 2015

P-Solve, part of River and Mercantile Group, is pleased to announce that it won two awards at the Pensions Expert Pension and Investment Provider Awards (PIPA) held on 20 May. The PIPAs recognise excellence among providers of products and services to UK workplace pension schemes and the three key criteria used to adjudicate the awards are performance, innovation and service standards.

P-Solve was named Best DC Investment Provider of the year for its innovative use of segregated custody accounts.

The business also won an award for Best Fiduciary Manager of the year for its expansion into DC and success widening the DC investment opportunity set through ETFs and the ability to use less liquid investments.

Commenting on the awards Britt Hoffmann-Jones, Managing Director, DC Solutions at P-Solve said: “We are very proud to receive recognition for our hard work on the DC side. These awards are a result of listening and responding to our clients’ changing needs. We first developed our fiduciary management service for DB schemes in 2003, to help clients manage our clients growing governance burden. Following a wave of new regulation and best practice, clients identified similar governance constraints for DC. So, we extended fiduciary management to DC schemes in 2011. Delegating dayto- day investment can help our trustee clients manage their time better – for example, by freeing them up to spend more time on governance and member communication. It is worth remembering that the suitability of a fiduciary approach depends on the trustee board.”

How the EDOS looked on 6 February 2013

Strategy

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Risk management is key

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While this is important, it means more to us. It is critical that, in our day-to-day dealings, both we and our clients benefit. To this end, we should not take risks in relationships where only one side is rewarded and we will be forthright in guarding against this eventuality. In day-to-day terms, it’s also how we organise our time, prioritise our work and assess new projects and development. The value of being commercial equates to creating value for all. It’s about balancing risk and cost against the potential of reward.
Ajeet Manjrekar

Co-Head of River and Mercantile Solutions

Ajeet focusses on working with trustees to understand their specific investment and governance needs in order to design innovative solutions to achieve their funding objectives.

As a qualified actuary with extensive experience in both investment consulting and asset management, Ajeet is part of the senior management team with responsibility for the quality and evolution of our client-driven services.

He has extensive experience bringing together teams from different backgrounds to address unanticipated but emerging client needs. Examples have ranged from designing capital protection solutions for Defined Contribution schemes, to helping foster US pension schemes’ usage of liability-driven investment. Recognising that ideas can travel – that solutions arising in one region or part of the market can frequently be applicable elsewhere – he harnesses the expertise and insights of team members from across our business to solve the client problem, whatever it might be.

He re-joined us in 2016 having spent the last few years in Deutsche Bank’s asset management businesses. Prior to that he was a lead investment consultant advising several of our defined benefit and defined contribution clients.

Ajeet has a degree in Mathematics from Warwick University.

Barbara Saunders

Head of Client Engagement

Barbara has overall responsibility for client engagement with River and Mercantile Solutions, focusing on maintaining and improving our clients’ experience of the business. In this capacity she is involved with all our clients, but in addition she leads the teams advising eight defined benefit pension schemes, ranging in size from £70m to £2bn.

These include clients for which we act as an investment consultant, and clients that have appointed us as fiduciary manager. Over her career to date she has in-depth experience of working with many more clients, including larger DB schemes, DC schemes, sovereign wealth funds and charities.

Barbara has significant experience of providing advice across the full range of investment considerations. This demands a grasp of detail, and the ability to understand that detail in its proper context, and the decisiveness to make definite recommendations on the basis of that understanding . But it also requires an aptitude for conveying that understanding to others, and for persuasion. This can prove crucial when significant investment decisions are required within a fairly short timeframe, but it relies on her ability to develop trust with her clients over the long-term.

Barbara’s investment expertise is reflected also in her role as a leading member of the Investment Strategy Committee, which sets the house view on investment and strategic considerations for our DB clients. She has a particular depth of understanding of liability hedging, having spent the early part of her career modelling and trading LDI strategies for DB pension schemes.

Barbara is a qualified actuary.

She graduated in 2004 with first class degree in Mathematics from Royal Holloway, University of London, and obtained a Post Graduate Diploma in Actuarial Science from Cass Business School.

Barbara joined River and Mercantile Solutions in 2007.

Jack Berry

Global Head of Solutions

Jack is responsible for providing River and Mercantile Solutions with strategic direction across all of its advisory businesses, ranging from defined benefit (DB) and defined contribution (DC) pension schemes to insurance companies , in the UK and US.

He is also the lead adviser on several DB scheme clients. These include clients that retain River and Mercantile Solutions as an investment consultant, and those that employ it as a fiduciary manager. He has experience as adviser to numerous DB schemes with assets of between £25m and more than £5bn.

His clients appreciate his strong understanding of the interplay between, on the one hand, a sponsor’s need to contain its pension-related risk and, on the other, a trustee board’s need to develop an investment strategy. Likewise, they value his ability to communicate to trustee boards and other advisors on the design and implementation of complex solutions, including equity derivative strategies and liability-driven investment (LDI). He is also able to draw on his international experience in prior roles and with River and Mercantile Solutions’s advisory business in the US, when advising his clients.

Within River and Mercantile Solutions, he has led work on the use of derivatives in LDI and structured equity, playing a leading role establishing River and Mercantile Solutions’s bespoke solutions business. He has also been actively involved in the development of River and Mercantile Solutions’s US advisory business since 2007. He joined River and Mercantile Solutions in 2004.

Jack is a chartered accountant. After working as an audit manager at Ernst & Young Zimbabwe and then in the corporate finance team at Standard Chartered Merchant Bank, in 1995 Jack co-founded a corporate finance and structured finance advisory business, Real Africa Durolink Zimbabwe, as a subsidiary of Real Africa Durolink, a listed South African Bank. Jack was one of the founding executive directors of Real Africa Durolink London when this subsidiary was started in 1999.

Jack graduated as a Bachelor of Accounting Sciences from the University of South Africa and holds a Masters in Finance from London Business School. He is a member of the Zimbabwe Institute of Chartered Accountants.

Matt Way

Chief Operating Officer

Matt is a chartered accountant who began his career at Ernst & Young in 1989 before moving to Lehman Brothers, where he worked for nine years, until 2007. From there he moved to Bear Stearns and then to Man Group, where he worked for five years with Kevin Hayes, who is now River and Mercantile Group's chief financial officer. Matt joined River and Mercantile Solutions in 2015 following roles at RBS and London Clearing House.

Matt has gathered substantial experience in business partnering, applying financial, commercial and practical judgement to all operational issues including product viability, forecasting, operational infrastructure, risk controls and compliance. At River and Mercantile Solutions he takes lead responsibility for efficient operation and effective risk management of the advisory and fiduciary management divisions.

He has senior management experience managing large teams and engagements across multiple businesses and support functions. He has a focus on change management and project management, which he has used to deliver simple, practical and innovative solutions and to enhance efficiency. He coordinates diverse teams and functions to solve problems as they arise.

Patrick O’Brien

Investment Director

Patrick leads the investment team, which is responsible for delivering River and Mercantile Solutions’s fiduciary management services to clients. His team conducts on-going investment research, performance monitoring and risk tolerance management, implements asset allocation decisions, and conducts execution trading and transition management.

Patrick is responsible for supervising all of this. Above this, he is a member of the Investment Committee and he chairs the Multi-Asset Committee, which between them determine River and Mercantile Solutions’s views on which asset classes to under/overweight and which investment managers to invest with. He therefore plays an important role in the formation of investment decisions, both from month-to-month and, when financial market conditions dictate, intra-month.

Patrick also has lead responsibility on two defined benefit pension scheme clients, both with assets in the range £100m to £250m. One of these retains River and Mercantile Solutions as its investment consultant while the other is a fiduciary management client. In this capacity, Patrick plays a pivotal role advising trustees on investment strategy, introducing investment ideas and risk management ameliorations to the trustees, and giving them appropriate training to enhance their governance capabilities.

Patrick began his financial services career as an operations associate at Legal & General, following two years in manufacturing industry. He graduated from University College Cork with a BSc in Finance.

Patrick joined River and Mercantile Solutions in 2008.

Ross Leach

Co-Head of River and Mercantile Solutions

Ross is Co-Head of River and Mercantile Solutions, where since 2004 he has acted as a lead investment consultant to the trustees of defined benefit pension schemes and to corporate sponsors.

He has experience of clients with assets ranging from £50m to more than £5bn, and across River and Mercantile Solutions and his former employer he has client relationships that have lasted more than 15 years. This calls on his skills to understand the needs of clients, to understand investment strategies and products, and to match the latter to the former in the simplest but most effective way possible.

Some of his clients retain River and Mercantile Solutions as their investment consultant while others have adopted a fiduciary management approach. He has supplied advice that has taken schemes to buy-out, and is currently working with a number of schemes that are focused on reaching a self-sufficiency target over the next 10 to 15 years.

Ross is a member of River and Mercantile Solutions’s Investment Strategy Committee. This committee is instrumental in developing client advice, and has the final word on whether a particular investment product is fit for recommendation to clients.

Ross, who joined River and Mercantile Solutions after four years at Punter Southall, the company’s former parent, has a degree in Mathematics and is a Fellow of the Institute of Actuaries. He has worked on a number of actuarial working groups.

Pensions Insight DC Awards 2016 – Best Default Fund Strategy

26 October 2016

P-Solve, part of River and Mercantile Group, is pleased to announce that it won an award at the Pensions Insight DC Awards 2016 held on 26 October. The Pensions Insight DC Awards 2016 and are designed to celebrate the excellent work done by defined contribution providers and schemes up and down the country.

P-Solve was named Best Default Fund Strategy as the judges stated they were impressed with how P-Solve adapts the strategy at retirement to allow for Pension Freedoms in a flexible way to meet the needs of different schemes’ members, and also the intelligent life-styling approach using blended funds.

Commenting on the award Niall Alexander, Director, P-Solve, said: “This month P-Solve celebrates its five year anniversary in DC fiduciary management. The award win reflects the hard work and results we have achieved on behalf of our DC clients (and specifically their scheme members) in that time, as we have sought to offer flexible solutions to the challenges facing trustees. Wanting to improve financial security for as many people as possible by thinking more deeply about investment than anyone else is central to our business.”

Engaged Investor Trustee Awards – Best DB Consultancy 2016

7 July 2016

P-Solve, part of River and Mercantile Group, is pleased to announce that it won an award at the Engaged Investor Trustee Awards held on 7 July, celebrating excellence among pension scheme trustees and their providers and advisers.

P-Solve was named Best DB Consultancy 2016 as the judges said they were impressed by P-Solve’s innovation and service. The firm’s submission emphasised the work P-Solve has done developing tailored investment solutions for small and medium-sized pension schemes, as well as large ones.

Commenting on this year’s award Ross Leach, Managing Director, P-Solve, said: “We are very proud to receive this award and the recognition of the hard work on behalf of our DB clients it represents. We strive to understand the challenges facing trustees and offer a range of services to provide real insight and support for our clients.

Pensions Age Awards – Multi-Asset Manager of the Year 2016

25 February 2016

P-Solve, part of River and Mercantile Group, is pleased to announce that it won the award of Multi-Asset Manager of the Year at the Pension Age Awards held on 25 February. The Pensions Age Awards were launched to reward both the pension schemes and the pension providers across the UK that have proved themselves by demonstrating excellence, sophistication and innovation in all aspects of what they do.

According to the judges, this firm has demonstrated its understanding of the multi-asset space by combining experience with skill in order to produce an investment offering well suited to the needs of today’s DB and DC markets – plus it has the performance to show its approach works.

Engaged Investor Trustee Awards 2015 – Best DB Consultancy 2015

2 July 2015

P-Solve, part of River and Mercantile Group, has been named Best DB Consultancy at the 2015 Engaged Investor Trustee Awards. The judges said they had been impressed by P-Solve's involvement in dynamic investment opportunities.

In addition to firm’s success, P-Solve client The Cheviot Trust won the Best scheme report and accounts category at the ceremony held on 2 July 2015, impressing the judges with its excellent design and well-executed graphics.

The award win is the latest in a number of recent successes for P-Solve having been named Best fiduciary manager and Best DC investment provider at the Pensions and Investment Provider Awards.

Commenting on the award, Jack Berry, global head of solutions at P-Solve, said: “We are very proud to receive this award and the recognition of the hard work on behalf of our DB clients it represents. We strive to understand the challenges facing trustees and offer a range of services to provide real insight and support for our clients.

"Wanting to improve financial security for as many people as possible, by thinking more deeply about investment than anyone else, is central to our business. We are proud that our work with pension schemes gives us us the opportunity to help more than 400,000 individuals.”

Pension Investment Provider Awards (PIPA) – DC Investment Provider 2015

20 May 2015

P-Solve, part of River and Mercantile Group, is pleased to announce that it won two awards, DC Investment provider and Best Fiduciary Manager 2015 at the Pensions Expert, Pension and Investment Provider Awards (PIPA) held on 20 May. The PIPAs recognise excellence among providers of products and services to UK workplace pension schemes and the three key criteria used to adjudicate the awards are performance, innovation and service standards.

P-Solve was named Best DC Investment Provider of the year for its innovative use of segregated custody accounts.

Commenting on the awards Britt Hoffmann-Jones, Managing Director, DC Solutions at P-Solve said: “We are very proud to receive recognition for our hard work on the DC side. These awards are a result of listening and responding to our clients’ changing needs. We first developed our fiduciary management service for DB schemes in 2003, to help clients manage our clients growing governance burden. Following a wave of new regulation and best practice, clients identified similar governance constraints for DC. So, we extended fiduciary management to DC schemes in 2011. Delegating day-to-day investment can help our trustee clients manage their time better – for example, by freeing them up to spend more time on governance and member communication. It is worth remembering that the suitability of a fiduciary approach depends on the trustee board.”

Pension Investment Provider Awards (PIPA) – Best Fiduciary Manager 2015

20 May 2015

P-Solve, part of River and Mercantile Group, is pleased to announce that it won two awards, DC Investment provider and Best Fiduciary Manager 2015 at the Pensions Expert, Pension and Investment Provider Awards (PIPA) held on 20 May. The PIPAs recognise excellence among providers of products and services to UK workplace pension schemes and the three key criteria used to adjudicate the awards are performance, innovation and service standards.

P-Solve was named Best Fiduciary Manager of the year for its expansion into DC and success widening the DC investment opportunity set through ETFs and the ability to use less liquid investments.

Commenting on the awards Britt Hoffmann-Jones, Managing Director, DC Solutions at P-Solve said: “We are very proud to receive recognition for our hard work on the DC side. These awards are a result of listening and responding to our clients’ changing needs. We first developed our fiduciary management service for DB schemes in 2003, to help clients manage our clients growing governance burden. Following a wave of new regulation and best practice, clients identified similar governance constraints for DC. So, we extended fiduciary management to DC schemes in 2011. Delegating day-to-day investment can help our trustee clients manage their time better – for example, by freeing them up to spend more time on governance and member communication. It is worth remembering that the suitability of a fiduciary approach depends on the trustee board.”

Pensions Consultancy of the Year 2017

24 February 2017

P-Solve is pleased to announce that it was awarded Pensions Consultancy of the Year at the Pension Age Awards 2017. The awards, now in their fourth year, aims to reward both the pension schemes and providers across the UK that have proved themselves worthy of recognition during increasingly challenging times.

The award recognises P-Solve’s bold approach to investment consulting since the business’s launch in 2001. This included, last year, the introduction of swaptions strategies for clients, allowing them to “get paid” for making strategic risk management decisions.

The panel of judges stated: “This firm stood out for its proactive approach and its use of innovation in a challenging marketplace. Its clear understanding of the investment hurdles facing its clients and its ability to help these clients, whatever their size, through the investment maze set it apart from the rest.”

Commenting on the award Barbara Saunders, Head of Client Engagement at P-Solve, said: “We are very pleased to have received recognition for the innovative investment solutions we can deliver. We are perhaps better known for being one of the pioneers of fiduciary management, but the investment intel that this gives us is applied equally to clients we advise. Ultimately, we look for the best solutions to our clients’ needs, and with clear explanations, our clients are able to act quickly when required. In turbulent times, opportunities arise, and you need to be fleet of foot to take them. We all know pension schemes need return, and we constantly search for ways to help them earn it.”

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Kevin Hayes

Global Head of Solutions

Kevin is Global Head of Solutions and Group CFO at River and Mercantile. He is an international CFO with 25 years' experience in financial services. Kevin began his career at Ernst & Young and was a Partner in the New York office covering financial services audit and consulting clients.

He moved to Lehman Brothers where he held various roles including: Global Capital Markets Controller, International CFO for Europe and Asia, and Head of Productivity and Process Improvement.

In 2007 Kevin joined Man Group PLC in London as Group CFO and Executive Director on the Group Board. He was also a trustee of the Man Group PLC Pension Plan.

Kevin has degrees in accountancy and law from Victoria University in New Zealand and is a Certified Public Accountant in the US.