High cost of longevity derisking sees ABP consider alternative hedges
Europe’s largest pension fund is priced out of longevity securities market but looks to investments linked to the elderly as longevity hedge
The high cost of longevity derivatives has led €237 billion Dutch civil servants' pension fund ABP to consider hedging this risk via investing in assets such as firms that provide medicine or care for the elderly, as increased allowance for longevity affects its funding ratio for the second year running.
ABP's figures for the fourth quarter of 2010 showed that life expectancy adjustments cost the fund 1.4 percentage points of its funding ratio, following a 5.8 point reverse at the end of 2009.
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