UK pension fund to vote on changing collateral
17 November 2011 Liverpool
Image: Shutterstock
Merseyside Pension Fund (MPF) is proposing to change its criteria for collateral in a bid to boost revenue, according to Professional Pensions. MPF hopes the move will generate an additional income of between £113,000 and £150,000 a year on top of the £754,000 it currently gets – a potential 20 per cent boost in revenue.
Currently, MPF allows its custodian, State Street, to hold high quality government debt as collateral but the change would make international equities and cash eligible if approved by the pension fund's administering authority.
Though there is debate over the use of equities as collateral, research has shown that the practice can lower correlation risk between lending and collateral portfolios, particularly when markets are volatile.
Currently, MPF allows its custodian, State Street, to hold high quality government debt as collateral but the change would make international equities and cash eligible if approved by the pension fund's administering authority.
Though there is debate over the use of equities as collateral, research has shown that the practice can lower correlation risk between lending and collateral portfolios, particularly when markets are volatile.
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