£1.1 trillion is invested in a part of the UK financial system that most people have never heard of.
In the second half of the 20th century hundreds of companies, including many household names like British Telecom, Tesco and Marks and Spencer, made a valuable promise to help look after their employees financially in retirement. These companies began to put aside money to back up that promise in ring-fenced pots called “Defined Benefit” pension funds. Today, after several decades of cash contributions and investment growth, these pots together are one of the largest accumulations of wealth in the world.
Defined Benefit pension funds use some of the most sophisticated and innovative strategies in finance and, in the more than twenty years I’ve worked in institutional investing, I’ve been privileged to work with some of the smartest people in financial services, including fund managers, actuaries and investment consultants.
Defined Benefit pension funds have certainly faced challenges – as was witnessed in September and October 2022 during the UK Gilt Crisis. However, there is much that we as individual savers and investors can learn from how these pension funds run their money.
This, together with insights from other important institutional investors such as insurance companies and endowments, is the basis for Big Small Money. I’ll explain the strategies and approaches used by some of the most sophisticated and respected financial institutions in the world and explore the key ideas and concepts that can help us all make better decisions for our financial future.
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