John Towner

Articles from John Towner

  • AN INTEGRATED APPROACH TO INVESTMENT AND FUNDING

    The challenges facing pension trustees and corporate sponsors are well understood, but the fundamental problem that both sides must ultimately solve is that in order to secure and protect member benefits, deficits have to be repaired before all member benefits are paid out; this is the key ALM challenge facing the UK pensions industry and unfortunately deficits have proven to be a stubbornly intractable problem for more than a decade now. The good news is that both trustees and sponsoring companies each bring an important and powerful lever to the table to repair deficits. On the one han ... ..read more
  • LOW BOND YIELDS DO NOT MEAN UNATTRACTIVE RETURNS

    It may seem counterintuitive, but it is possible to invest in low yielding assets and generate attractive excess returns. Consider, for example, Japanese Government Bonds (JGBs). Since 2002, 10 year JGBs have yielded a measly 1.22% p.a., but their total returns exceeded yields by almost 1.00% p.a. with a volatility of just 3.88%. This equated to a return of LIBOR +1.86% per year and in risk adjusted terms, this made JGBs very attractive assets indeed. If, for example, they were leveraged such that their volatility was 10%, then JGBs would have delivered a mouth-watering LIBOR +5.06% p.a. ... ..read more
  • INDEX-LINKED UTILITY AND PFI SWAPS

    As pension schemes continue to establish deficit repair strategies, demand for inflation-linked assets remains strong.  While most schemes access their exposure to inflation-linked assets through either their LDI or gilt manager, more agile schemes are also starting to consider opportunities beyond the index-linked gilt and collateralised swap markets. One opportunity that has arisen recently is that tighter capital standards, in particular Basel III, are incentivising banks to reduce the index-linked swap exposures they have on their books to regulated UK utility companies and PF ... ..read more

John holds a BA (Hons) from Georgetown University in Washington DC and a Certificate of Post-graduate Study from the University of Cambridge.