BlackRock has been appointed by LV= Pension Fund to manage a £1.5bn ($2.3bn) liability-hedging mandate.

This is an extension and revision of an existing liability-driven investing (LDI) strategy, which BlackRock say will increase the fund's protection from market risks and uncertainties including interest rates and inflation.

“We are delighted to be working with the trustees and their advisors to implement a revised approach to the fund’s liability hedging," said Graham Jung, a managing director in BlackRock’s UK institutional business. 

With the fund's actuary, BlackRock has modelled LV= Pension Fund's inflation sensitivities, converting cash flows into a benchmark which can be invested in. 

As a result the manager has included a wider range of swaps, gilts and repos in the mix of the Fund’s LDI investments. With regular evaluation the manager can try to ensure the most cost-efficient hedging assets are used at any one time. 

"The process of transferring and restructuring the previous assets was very complex and took a lot of co-ordination and co-operation from all parties. Having completed this, we are now in a position to ensure that the fund benefits from the full range of market opportunities,” added Jung.

In addition, a volatility-controlled synthetic equity strategy has been introduced to reduce the fund’s exposure to equity market risk.

“We have a duty to both our scheme members and the sponsor to ensure we continually review our investment arrangements. We appointed BlackRock to take on the management of the liability-hedging mandate as they offered a tailored approach that balanced risk reduction with efficient implementation,” said Paul Cassidy, chairman of the trustees. 

LV= Pension Fund's appointed consultant Redington, assisted in both the manager selection and the structuring of the revised mandate.