LONDON, 22 September, 2008 – Liability Driven Investment (LDI) assets managed by the leading UK managers have shot up by over a quarter (27%) since the beginning of the year to £144bn, according to research by Aon Consulting, a leading pension, benefits and HR consulting firm. Aon believes this is reflective of the increased awareness of pension scheme risks within both small and large schemes, as well as the introduction of both simpler and more sophisticated LDI solutions that appeal to pension schemes of all sizes.

LDI is a form of investing in which the main goal is to minimise the risk of adverse movements in interest rates and inflation impacting the valuation of scheme liabilities. The research carried out by Aon Consulting, shows that as at 30 June 2008, LDI assets had increased by 27% from the £113bn recorded at the start of the year to £144bn. This amounts to roughly 17% of estimated UK pension fund assets. The increase in activity was evident in both small and large schemes, with the assets under management in both pooled and segregated LDI mandates increasing by the same percentage.

In terms of the types of LDI mandates in place, the vast majority (£127bn, 88%) were segregated, with 90% of these in respect of pension schemes with assets over £500 million. Of the pooled mandates (£16bn, 12%), only 44% were in respect of schemes with assets more than £500 million.

Commenting on the findings, Andrew Firth, investment principal, Aon Consulting said: “The LDI market has really seen a boost in the first six months of this year, as trustees are becoming increasingly aware of risks in their scheme, and showing greater interest in controlling them. At the same time, fund managers are improving their LDI product range and marketing. Current market volatility serves to underline the risks inherent in many schemes and we think will encourage more to focus on them going forward.

“The findings show that segregated LDI funds continue to be the popular choice with large pension schemes, which typically require more tailored solutions and are willing and able to accept the greater governance and cost implications that come with them. Pooled funds on the other hand are more accessible to all schemes, both large and small, as they provide relatively simpler ‘off-the-shelf’ solutions at lower cost.  Increasingly, however, the pooled solutions are becoming more sophisticated, providing a greater range of products which are likely to hold appeal for pension schemes of all sizes.”

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For more information contact:
Susie Patterson / Josephine Corbett
0207 269 7233 / 7250
Susie.patterson@fd.com  /  Josephine.corbett@fd.com

About Aon Consulting
Aon Consulting is a leading human capital consultancy, helping organisations of every size to attract and keep the employees they need. We advise on all aspects of employment, including health-related insurance and risk; employee compensation and pensions; human resource strategy planning; job design and change management; and staff assessment and legal issues. Aon Consulting is a division of Aon, one of the UK’s largest insurance brokers and providers of risk management services and a major force in reinsurance and the UK human capital consulting market.  Aon Consulting Limited is authorised and regulated by the Financial Services Authority.

About Aon
Aon Corporation (NYSE: AOC) is the leading global provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting. Through its 36,000 colleagues worldwide, Aon readily delivers distinctive client value via innovative and effective risk management and workforce productivity solutions. Our industry-leading global resources, technical expertise and industry knowledge are delivered locally through more than 500 offices in more than 120 countries. Aon was named the world's best broker by Euromoney magazine's 2008 Insurance Survey. In 2008, Aon ranked highest on the Business Insurance ranking of the world's largest insurance brokers based on commercial retail, wholesale, reinsurance and personal lines brokerage revenues. Aon also was ranked by A.M. Best as the number one insurance broker based on brokerage revenues in 2007 and 2008, and was voted best insurance intermediary, best reinsurance intermediary, and best employee benefits consulting firm in 2007 and 2008 by the readers of Business Insurance. For more information on Aon, log onto http://www.aon.com/.

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