Building a robust operating model that aligns with the new investment profile.


Our point of view

Problem Statement:

As the complexity of investments in life and pensions has increased, so too has the operational complexity. Whether this is due to an increased focus on illiquid investments, increased derivative usage or overall trading volumes, L&P treasury and trading functions were not historically built to address this complexity. With this increased risk and renewed regulatory attention it is time for firms to take stock and upgrade capabilities and system to meet this new demand.


The investment profile of many life and pensions firms is now closer to a large hedge fund rather than traditional long-dated pension funds. The related operations need to reflect that. In building this new operation there is a lot to learn from adjacent sectors such as hedge funds and capital markets in building a robust and cost-effective operation.


Case study


The firm was an L&P provider with a significant bulk annuities portfolio. While investment volumes and complexity had increased significantly, the firm was concerned their treasury and trading operations weren’t keeping pace.


Reviewed the current operations against market practice in L&P and adjunct sectors such as asset management and capital markets. Based on this review identified a number of areas for improvement and recommended a series of practical steps to improve the robustness of the operation.


Immediate steps were taken to shore up key areas and a longer-term operational transformation programme was initiated. This included core trading systems, control and reconciliation processes, collateral management, liquidity risk measurement and management and operational MI.


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