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Continue reading →: The UK’s trillion-pound secret£1.2 trillion is invested in a part of the UK financial system that most people have never heard of.
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Continue reading →: Institutional investors and the good societyBritish institutional investors represent some of the largest accumulations of wealth in the world. This means that fiduciaries and policy makers have the power to influence many parts of our society and have a duty to use this influence responsibly. This is consistent with a wide view of fiduciary duty,…
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Continue reading →: Leverage and the 2022 gilt crisisIn this post we will look at the risks associated with using leverage. We’ll also deep dive into the 2022 gilt crisis, which ultimately led to the end of the Liz Truss premiership.
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Continue reading →: An introduction to leverageLeverage has a bad reputation, often being associated with risk taking and speculation. In fact, it’s one of the most widely used risk management techniques used by institutional investors. It’s also something many individuals will have experience of if they have a mortgage. In this post I will describe what…
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Continue reading →: Time horizon-based investingIndividuals don’t need to worry about collateralising derivates or the pros and cons of holding very illiquid assets like infrastructure. However, they may still need to think about liquidity. If their income falls or their outgoings increase, they may need to spend some of their savings to make up the…
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Continue reading →: Liquidity waterfallsLiquidity planning means having the right amount of cash readily available to make future payments. If an investor does not have enough cash then they may be forced to sell illiquid or volatile assets at a loss. If they have too much cash then they risk missing out on the…
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Continue reading →: What causes investments to be illiquidLiquidity refers to how quickly and cheaply an investment can be sold. Liquidity planning is an incredibly important part of investing. Institutions like pension funds are very long-term investors, often being around for decades. This gives them the opportunity to invest in illiquid assets to earn an illiquidity premium for…
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Continue reading →: Liability Driven InvestingUp until September 2022, nearly no one had heard of Liability Driven Investing (LDI). This all changed with the gilt crisis and the end of the Liz Truss premiership. When LDI did make it onto the front pages, it was sometimes characterised as a speculative and risky activity. This isn’t…
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Continue reading →: Liability matching: when what you own behaves like what you oweLiability matching is when the value of an investor’s assets moves in line with the value of their liabilities. In other words, what they own behaves like what they owe. In this post we’ll explore why this matters and how institutions do it.
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Continue reading →: Cash flow matchingMost institutional investors like defined benefit (DB) pension funds have liabilities as well as assets. Assets are the things that the institution owns, like bonds, equities and real estate. Liabilities are what the institution is obliged to pay out, like pensions to members of the pension fund or insurance polices…
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Continue reading →: Managing a multi-asset investment portfolioIn this post we’ll continue to go behind the scenes, to see how a professional firm manages a multi-asset investment portfolio. Last week we explored portfolio optimisation. Portfolio optimisation helps investors understand which mix of investments is likely to give the best risk / reward pay off. However, this is…
Hello,
I’m Jon
Welcome to Big Small Money. I believe that learning how large institutions like pension funds invest can help us all make better financial decisions.
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