John Atkin


“Everyone has different starting positions in terms of their sponsor, their liabilities and their funding.” John Atkin, M&G Investments


Either you are in cash and get negative yields or you try to find a proxy. Atkin: That is a fascinating point. If you are seeking good value you should not lock into a similar risk at a poorer price, because you cannot then capture the better value when it arrives. We have found mortgage-backed securities, which being unattractive for Solvency II investors, give an extra premium. The higher quality ones still give you a decent return plus good liquidity, if you are looking to find the sub- 10 year assets then they are a nice conduit. We and a few other managers have had an idea to “park” assets in high quality ABS while looking for higher paying, illiquid ones. What you are effectively then running is a “not-finding-the-right-asset” risk rather than an investment at a poor price risk, which is usually a more acceptable risk. Ghosh: I would like to go back to an earlier point on this approach being the privilege of bigger schemes. To an extent it has been, but it doesn’t have to be. There is not going to be enough ability to buyout, so there has got to be a realisation that all schemes can’t buyout so they will need this approach. Waiting for value to appear isn’t a natural behaviour by clients who are beholden to investment advisers. It comes back to those bigger schemes that have their own in-house teams. Halfon: The driver to that limitation to small schemes is also due to when you invest in illiquid debt there is usually a cost of capturing the information, which is pretty high, and usually those projects are not scalable on the low side. A minimum amount would be £15m to £25m for every loan. Even if


March 2019 portfolio institutional roundtable: CDI 13


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