Roland van den Brink: Is the management of interest rate derivatives like a leaky tap?
Blog door Roland van den Brink
The investments of a pension fund can be divided into a return portfolio and a portfolio that serves to manage interest rate sensitivity. In technical terms, the latter is called 'LDI portfolio' or 'matching portfolio'. Part of the interest rate hedging takes place through investing in bonds and mortgages. However, interest rate derivatives (interest rate swaps) are used for the most part.
The LDI portfolio often has the greatest influence on returns. For example, interest rate derivatives at pension funds lost €146 billion in value by 2022 due to sharply increased interest rates. In light of the Future Pensions Act (Wtp), various funds have further reduced their interest rate sensitivity during 2023, often with the help of interest rate derivatives. That is why I consider the implementation of interest rate hedging. If it is suboptimal, you have a leaking tap.
No complaints?
Many large parties from other countries, especially the US and England, manage the LDI portfolios. From marketing we know slogans such as 'customer first'. Here we see something striking. In many European countries, pension funds have complained about extremely low interest rates, causing the valuation of pension liabilities to skyrocket.
