Editorial


CASH-FLOW DRIVEN INVESTING


CONTENTS


P4 - 5: Cash-flow driven investing An introduction to our coverage on CDI during the Covid-19 crisis.


P6: CDI in figures A breakdown of how asset owners are using cash-flow driven strategies.


The wisdom of fixing the hole in your roof while the sun shines has been laid bare by the Covid-19 outbreak. Volatility and warnings of a downturn that could be deeper than 2008’s crash have hit liquidity. This comes at a difficult time for final salary pen- sion schemes, with almost three-quarters (73%) not generating enough cash to pay member benefits.


The markets may have changed, but for defined benefit pension schemes the strategy has not: generate enough cash to pay member benefits in full and on time.


Where cash-flows are not fully matched, schemes may have to sell assets to fund their obligations at a time when valuations have declined. Meanwhile, those who fixed their roof when the sun was shining by matching their long-term liabilities to cash-generating assets could per- haps sleep a little easier during such economic turbulence. This is, after all, believed to be a short-term disruption with the added benefit for those holding cash to perhaps take advantage of widening spreads to improve their cash-flows. But investors are being advised to proceed with caution. What if this short-term disruption has longer-term implications? What if defaults in the bond, private debt or property markets rise? Such events could lead to downgrades on investment-grade debt and force liabilities higher, so schemes may have to invest to match their re- vised liability profile.


Institutional asset owners are certainly living in interesting times and this supplement looks at what could lie in wait for those following a cash- flow driven investing strategy.


P7: The participants


A look at who contributed to our virtual CDI discussion.


P8 -15: Discussion transcript A debate on the issues impacting CDI, such as volatility and ESG.


P16 -17: CDI strategies – navigating the storms Janus Henderson’s Norbert Fullerton explains how the coronavirus crisis has revealed the efficacy of CDI strategies.


P18 - 21: CDI: Coronavirus-proof your portfolio


With the world almost certain to enter a recession thanks the Coronavirus crisis, Mona Dohle looks at what it means for CDI strategies.


Mark Dunne Editor


m.dunne@portfolio-institutional.co.uk


April 2020 portfolio institutional roundtable: CDI


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