Look after the pennies

Article Abstract:

Pension funds tend to hold only a small amount in cash, and cash management has tended not to have a high status. Some 5% is held in cash by British pension funds, and custodian banks often manage cash balances for pension funds. Professional money managers are increasingly used and their AAA-rated money funds can offer cost savings. There is a need to reduce risk levels through diversification of institutions where funds are located, as was emphasized by the Barings case.

Portfolio Management

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Custody clients drive a hard bargain

Article Abstract:

Global custody companies are going through a period of consolidation which looks set to continue. The increased usage of new technology leaves smaller firms with limited choices such as being acquired by larger firms, subcontracting portfolios, and developing niche markets. Technology involved annual upgrading of systems in addition to the need to train personnel, both of which are expensive. RBS Trust Bank was set up from the acquisition of the global custody business of SG Warburg by Royal Bank of Scotland.

Investment Banking and Securities Dealing, Investment Banking, Security brokers and dealers, United Kingdom, Investment banks, Custodianship accounts, Custodial accounts

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Constructing a portfolio

Article Abstract:

Funded pension schemes have to deal with the risk of assets being less than liabilities. Most efforts in the United Kingdom tend to focus on ensuring that assets meet benchmarks, rather than ensuring that benchmarks meet liabilities. There has been some movement toward bonds from equities for mature pension schemes as a result of the minimum funding requirement. Derivatives are one way to reduce risk, though they tend to be expensive if they are highly customized. Debt instruments give opportunities for pension fund security and are favored by the British tax regime.

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