The Mercer Dynamic De-Risking Solution (MDDS) introduces a governance framework that allows U.K. pension plan trustees to manage their plan along a path to full funding, enabling them to be more proactive in banking investment gains and limiting potential losses from market fluctuations, according to a Mercer news release. Key features of the offering include funding level monitoring, a rules-based approach to locking in market gains, an integrated liability hedging strategy, and measure to mitigate downside equity risk.
MDDS will work by taking control of a scheme’s investment strategy within a pre-determined set of parameters, the announcement said. Once objectives are agreed upon in terms of funding target, timing and risk tolerances, Mercer will use a proprietary tool to calculate and expected funding path and recommend a series of funding level bands that incorporate a mix of growth and protection allocations.
The funding level will then be monitored and reported daily by Mercer, and if it crosses a band, Mercer will immediately instigate pre-agreed upon investment changes.
“We’ve developed the MDDS solution with the U.K defined benefit market in mind, but believe it will be adaptable to other markets with a significant number of defined benefit schemes,” said Alan Baker, chief operating officer for MDDS, in the announcement.
More information is at www.mercer.com .