Boots Almost Finished Implementing Swaps Asset Strategy

June 23, 2005 ( - UK Retailer, Boots, which made a high-profile switch into an all-bond portfolio in 2001, says its strategy of using swaps to match pension liabilities is now almost complete.

The Boots pension plan intends to allocate 15% of its assets to equities and property to match longer-term liabilities, according to an IPE report. The remaining 85% of assets will be invested in a portfolio of high quality investment grade bonds of varying maturity, with interest rate and inflation-linked swaps used to improve the matching characteristics with liabilities, according to the news report.

The company said its swaps strategy was almost completed as of March 31, 2005. It said the overall asset allocation provides a “relatively good” hedge against liabilities on an actuarial basis and on an accounting basis under the FRS17 accounting standard.

Boots said there was an £83 million funding deficit – compared to £58 million a year before – which Boots has agreed to make good with additional contributions of £11.7 million over 10 years, IPE reported.

The company garnered worldwide attention with its all-bonds investment strategy (See  Boots Walks Away From UK Equities ).