Cashflow Driven Investing | Institutional Masterclass

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  • 39 mins 39 secs

There is plenty of innovation taking place in the cashflow driven investment market. So what are the latest trends and what do they mean for pension schemes? To discuss in this Institutional Masterclass are:

  • Mark Foster, Global Head of Outcome based Product Strategies & Solutions, Aberdeen Standard Investments
  • Boris Mikhailov, Global Investment Solutions, Aviva Investors
  • Adam Lane, Director, PwC
  • Jon Exley, Solutions Manager, Portfolio Solutions, Schroders



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There is innovation of plenty taking place in the cash ledger of an investment market to discuss the latest trends of what they mean for pension schemes. I'm joined here in the studio by john exley. He is solutions manager. Portfolio solutions that traders. Mark foster, global head of outcome based product strategies and solutions. Aberdeen standard investments. Adam lane, director at pwc, on boris mikhailov. Global investment solutions at aviva investors. John, actually, could we start by getting a working definition off ? C d i well, see, he is a natural, natural endgame for for a pension scheme. Particulars that is the mature it involves combining portfolios of fixed income assets, including early i to meet the liability cash flows as they fold you with minimal disinvestment or reinvestment risk. Teo, close the funding up on dh stabilize the funny position. Ondas a fund manager, water the products or where do you fit into this world ? Well, we were unnatural murder of the fixed income assets on the l d i t product. Comprehensive solution. Ok, there's an asset management solution, mark foster evidence standard. A similar story for you very much. I mean, part of my rule is actually putting together product strategist and solutions for clients. And if you're thinking what key needs clients have today, they give growth. Lively protection and income is clearly something that the client's needs, and we're very keen and putting solutions right there that that meat that made stand a bit of aberdeen standard was a life of his pedigree. Is there much life ? Office input into cdos is a pure asset management. Plan it's. Interesting. You are starting to see pension schemes moved ultimately toe look very like it's like solution. So some of skill sets are very similar. But in terms of insurers, they are regulated in a very different way. So some of the regulations a lot tighter things like matching adjustment, those tea it will types of assets insurance companies can actually invest in. So the solution similar but the types of assets that are used for if they atomize a consultant, what type of client you talk to about cd i ? Well, we worked with a very wide range of clients on dh. Really ? We're not just focused entirely on the asset side, but also just how do we solve the pensions problem for small two very large clients. But there was this sweet spot for this top solution has been looted too. Is a scheme that's reasonably well funded, reasonably well, mature and look into secure members benefits. So a very wide range, but the key one being those better funded schemes. So this isn't a magic bullet for everyone. This is potentially an appropriate strategy, depending on where your scheme is in its funding journey. Absolutely. It is definitely not a silver bullet, but could be a very useful solution on really the releases helping clients decide what the right solution for them. This is a community. Is that cd i was it's something completely different and hope we can dive in some of those ideas as we go through today's session think that burst mckerrow, who are the natural clients ? For someone like aviva, investors expansion skims its insurance companies. Anyone who's looking for cash for management solutions and obviously, particularly pension schemes mature in room, having casual negative there's an increased focus on income generating strategists. The cd i fits in very well with that on in terms the expertise is that something where you need purely the fund management expertise took rumpole fellows of bonds ? Or do you need another layer of expertise of the actual matching of these cash flows, too ? What ? The pension scheme then taken a step back if you look at tv investigative services, part of five group. So we have bean manage and city strategist for insurance clients for many, many years. So it's his pension schemes obviously now looking at this type of solutions we've started doing them poor pension schemes as well on it's not just the acid pace it's also the insurance piece so you can reshape your assets. The better match your cash flows, increased certainty of meeting outcome. But also you compress other livers. For example, you can do kevin's insurance weaken the longevity, hedging, opportunistic buying buyout. So we worked very closely with his group to deliver on turn solutions. Teo to our clients, the pension schemes would be the natural place, but john ceo has been around for awhile. How do you think the thinking around cd i has evolved and deepened over the last couple of years ? Well, i think it's evolving in a couple of important ways, i think i think this increasing recognition now in first lead that that cd isn't also twelve die on that cd. I works best when it's close to integrated with the strategy, i think important with boris's points about the insurance girls i think ld high school's probably probably even more important than the insurance skills, because ultimately it doesn't really you can retain cash flows with l die, so the idea of exactly matches all the cash flows isn't essential to seo what's important. You get enough enough cash that you then you could then reshape was using all the techniques you met. You mentioned the future just for those who don't know. Can you just explain what ? In a nutshell ? Tough ass what viability driven investing years well, libelous driven investment is essentially hedging interest rate in inflation risk ulf off pension liabilities. But it's hard it's always been about matching cash flows. Because although you express that is of interest rate risk an inflationary, actually matching castro's with all their strategies. So so it's it's a it's a way of ensuring that capitalism matched with fixed interest inflation in investments and running on from that is schemes look att that's a liability driven investing what point should they start ? Toe tip maur into cash flow ? Can you give us some idea ? Is it about the size of your scheme, the maturity of your scheme ? Think it's about like don't say this about funding level, but also their maturity. I think they're the two key metrics, but the interested but if you think of cash flow management generally, i think a lot of people a lot of talking industry by car slow is becoming kostya negative. So that's brought cd i and a pure cd i perspective, but also casual management to the four. I think so, it's. Not necessarily, but a pure full cd i solution it's actually also by having components that can meet the short term needs. So some of the smaller clients are probably not from a funding level position. They're able to put a cd i fool solution place. But it's starting to think about those early castro's, are you going to meet them as they told you ? And is there a good rule of thumb for how well funded you need to be to start thinking about cash ledger of investing ? Well, i think you need to really articulate what your target is, because until you know where you're going, you kind of guessing in the dark, really ? Essentially, if your route is buy out of a very different approach, but one i've articulated for example, i once we're off this poor father not necessarily interested in bio in the short term that you've got a whole different game and that's the point you start thinking about, how should i start orientated ? My portfolio ? Exist is really a journey, and i think that's the thing we've learned since cd i first came in within the industry is that this is actually no it's, not final point. It's just one step on the journey toe finally securing these benefits in terms of the rule of thumb so it's a it's a very mature scheme funded ninety percent. You can actually fully implement city i more or less obviously depends parameters but it's return sounds maybe gilles plus one one and a half below where you can really start investing just in private that public that i'm still using the old i but its funding level drops. He returned targets. You know the high return. Then you still have to rely on the girl. Fasten girl facets to get you out of the front of this brings in a really important point so we can look through it. Say how to insurance companies really invest on dh there, typically aiming for return target of guilt plus one point two are just slightly above that. So if you your special well funded on that basis, you have enough money to pay the benefits. There's just a question. Of what risk capital do we need to offset any residual risks ? And that's often for the average scheme, they've got enough assets today to be able to pay those benefits, what they don't have sufficient confidence, the risk buffers in place to kind of whether any particular storm jon, you know, you want to come in a little earlier, covered your points off ? Well, i was just going to you're going to pick up on on on adam's point about about object is because it was the second point was going to make about how thinking's evolved over the last year or so. I think a few years ago cdo seem purely as a self sufficiency approach where you're just going to buy these assets and hold them to maturity. I think increasingly cd has been seen sena's a stage in the path towards buyout andi actually putting the strategy that manages you the next fifteen years or so, while your deferred retire, the transfer value story plays out, you do live guilty management, etcetera, to actually reach the situation, maybe in ten or fifteen years time where your ass it's a well positioned on your funding level is well positioned, just t buyout. What will essentially be a pension apart fully by then ? So so i think the thinking is merging in terms of not being either all round the self sufficiency or bio to think people are saying it is a sort of self sufficiency route to bio wave scene to john's point, we've seen a lot smaller schemes start to think they can afford to go to a full c the isa said, but in terms of wilshire known liabilities on your noon life, at least hand to be your pensioner portfolio. So people looking at first, ten, fifteen years putting something in place, and then it becomes a question, do you want a liquid components ? You want liquid components ? Because by it might become more attractive and easier to do sooner than you actually thinks. So is that key question ? What investment universe and i must tie up. Do you want in the type assets you have, andi ? I mean, talking through quite a lot of terminology. Cem cem. Quite complex concepts behind all of this. How easy is this to explain ? Two trustees. How do you create a framework where you so we need to look at a number of things and cd i might be the answer but it's not necessary. Not guaranteed to be sly. Perversely, i think this top is actually the easiest topics to explains trustees and just let me let me build on that you challenged. I'm glad you challenge john with the question that is the right man to go see the eye. For all the complexity of managing the dp pension scheme, the aim is simple. That's paid pensions i'm all cd i essentially is is invested in a way that meets those benefit payments at that level. It's not very complex, it's almost people got wildly doing this already. Andrea lee that's the first start in the educational process yes, one starts to get into the nitty gritty of how the structure portfolio. How'd you optimize it ? What's the target what's the right time to be doing these things. Those components of far more challenging. But in my experience that released trustees, i'll get better equipped with this idea. Transition is being from kind of growth assets ld i cash flow aware as we say. Maybe two full cd i and then eventually some sort of scheme. Exit strategy. Okay, thanks, boris. Moving on from that, we talk about cash flow matching. How closely do you need your cd ? I product ? A match ? The demands of the scheme. I mean, i think i think joan on eleven, actually marketed touched on some points, so it doesn't need to precisely much every single cash flow. But obviously it's much your scheme. We had a pensioner's mark talked about so there's a high degree of visibility of the cash. So you can design a strategy that do that. But as you go out in terms and it's more about how you get your additional return so it's how they invest in credit, how do you get it was just important about the integration of cdn ld because because l d i will naturally will be the natural provider of liquidity to twenty pay monthly pension. You're unlikely to get bombed coupons arriving every month to pay the pensions. What will really happen is those coupons are flowing to the manages cash management process. Thie is well, actually actually actually pay, because the man is just a natural. The critic facility. Adam, you wanted to come in very quickly. Cd is not all about cash flow that's all it's about getting certainty about return over a long period of time with conventional growth. Asset. You have confidence about returns, but you got no visibility out for a number of years. So if we are in tate airport phase, we've got observable returns over a number of years that gives certain sea rather than the confidence, the songs you've got to return. You need the income to pay benefits and any excess liquidity in a very strong position. Really that's the power of cd i absolutely agree without doing the cover yet. So that is that you need to make sure that you don't need to spend the money before the assets mature, so you can always front load us. It's. You confronted us, it's getting returns earlier and then reinvest that to pay them later. But what you don't want tea back, load us, it's too much so that so that you're you're actually borrowing against those assets to pay immediate attention. First, we're moving from a world of kiwi too cute equant of tightening on dh lots of observers out there. So it's gonna have a big impact on bombs and equities and volatility ? How does that affect how you should think about cd i ? It affects a number of ways that the interesting bit is moving. Teo quartet of tapering what you're starting to see is some long term interest rates start to rise. So it's a great leveler, actually, for some of smaller schemes i haven't done phil hedging programs. Some of their funding levels have improved quite substantially over the last eighteen months of for those avid readers of the pension protection fund website, the aggregate deficit of people ppf schemes was a four hundred billions going to forty billion over eighteen months. So a lot of schemes started get better funded. And therefore, i think cd i become something that's more palatable. Something that they can look to do so, yeah, in term cd i again, it's a risk management is about giving certainty of i come to clients as you get into more volatile world. Potentially as well. Then, you know, these are the types of strategies ld i cast a german investment that you should be looking at. Of course, if you down the line hook into a guilt with a pretty attractive yield ten, twenty, thirty years, why do you need any other asset classes apart from that ? Did those government debt just starts with a lot more attractive ? Now you're asking about for the ability can now going by guilt too much their liabilities ? Absolutely. Why wouldn't you do that ? So go down the route through as an option. But it's, a cz mark mentions most pensions kim's also, the funding levels have improved their still in deficit, so it depends on the measure of the two. Looking at ppf is one way to measure the liabilities, so pension scheme still need thio generate returns ? Teo close the funding gaps so you can't just by guilt to do that. So they need to look its wide opportunities set on by buying debt with its public private debt, on holding it to maturity. You know what he'll do ? You're looking then obviously you tell of defaults, another experience, but you know what ? Cash plus you'll be getting, you know the returns will be getting you're giving up compared to traditional approach equities, and you get your much assets you, given that any potential upside from your equity is that you can get but you also massive cuts in there downside risk that's how increasingly certain, john, from your point of view, we're also going look about there being a lot more asset volatility. Is that something that should concern people who are looking at cd i ? Or is it really only about those coupons and that income stream that's important, but nothing i said commit completely ignored if it's signalling, increasing, default, respond in theory, once you put in place cdr strategy, you're only concerned with the actual before level of the bond. So the question so so you can you come to some degree, ignore the fluctuations in critics belt if you if you're confident that that the money good and we'll deliver the cash flows that you require and you see this with some actual is actually adjusting discount rate in, along with credit spreads of cdr strategies to to create that dampening off any asset volatiles, because this is essentially buy and hold strategy conventional bond fund that moves around and trades all over the place you're trying to have a cz much of your portfolio held in a basement in basis is possible on tv, the hook, the hopefully will be held on the and and we talked about private, publicly listed fixed income assets. How easy is it to get a conversation going with trustees about private debt, something they tend to shy away from where they're very comfortable with it ? I think there's been a north lot focus in that particular asset class, and i think we're finding trustees now becoming more skeptical about it being a crowded market. We're seeing far more interesting and more diversified portfolio liquid assets. How easy is it ? Get started, of course, trustees are interested in hearing about ideas and deliver very attractive returns and much lower risk in conventional growth assets. That's, that's a really good story in trusties really interested, but the kind of we coined the term kind of matching plus assets as interests here the guys views on what q t might be and there's a number of asset classes out there. They're not going to be lot unaffected, but largely diversified away from short term interest, right ? Rates will be like conventional fixed income example might be a long lease property or police mortgage things that kind of long term and actually aren't marked market the same sort of way should be far more insulated in terms of the downside in that kind of volatile environment on the final thing, i'd say is this new environment volatility sounds bad, but prepared investor could spell quite good opportunities to locking attractive levels. We just need to have the right government's framework in place to take take those opportunities that arise it's all about starting this, the end game in mind, working backwards for the framework in place to get there with the using cnn ld i with ease and traditional approaches, it's all about my power, the route of travel direction it's interesting the valuation comment, though on private marcus i think a lot of people are starting to say it's a crowded space in some way because these types of assets are attractive to insurance companies as well, but definitely still is some attractive quality show, and it does bring that diversification to portfolio. So historically, pension schemes, i think it grew grew from seven percent to ten percent last year, but the allocations to private marcus is very, very small to the diversification to get the liquidity premium question is someone that disappearing, but there will still be on eloquently. Priya i also just that wider opportunity said, because some of the public markets are actually listed marks in the uk, us, in fact, have actually shrank a little bit. So those open up the opportunities that i think there still are attractive markets with just just coming for its very own private private markets in particular, obviously, as i mentioned, city is something that insurers have been invested in for many, many years and when it comes to pension schemes, don't constrained by the same stringent regulations, has insurance what it means in practice that they can take full advantage of their flexibility actually select against insurance on what it means in practice, in particular, relevant to private assets. So it's yeah, absolutely right. If you look at the long end of the market, ensured that much, much now, justin type assets is overcrowded. Market spreads the contracts. And maybe you could give gilles plus one fifty one. Sixty for nessman. Great type assets with its infrastructure, that private corporate, that but as a pension scheme, if you relax some of the parameters still keepin assets suitable for city i purposes, you can increase the spread and also speed up the time to deploy the way very much seeing this in terms of that journey. So if you're looking to kind of do a conventional buyout in a few years time, you wouldn't load your portfolio with assets. It wouldn't fit within insurance regime. But if you've got, say, a five or a ten year window, the assets of perfect for that. So the more like a conventional growth asset than the rcd. In between type assets that's why so really important ? Have clarity on your goal. So you know how to take portfolio in the exact right way very quick, because i do want to bring johns itching to get in on this if you are. If you're heading for buyout and you have some liquid assets, your insurer doing in species transfer is part of the deal that fine or do you have to get rid of them and being something the insurance ? Once i'm involved, i'm involved in a number of cases where that's extremely tricky often you have to find some sort secondary market. I think the lesson i've learned through the development of cdr is it paid to work closely with an insurer if that's what you're going on more and more so we're seeing clients what with insurance on early stage, orientate the portfolio into a liquid that can be in species. So if you've got a legacy liquid portfolio that's very tricky to deal with until it's run off if i'd bean saying, talking to aviva life for several years and we were gradually aligning ourselves that get a job with your brothers in the market, it's prince john well, when i was going to say the just expanding on boris's point about about the fact that the insurance company is a very crowded special, very long, longest area pensions are much more flexibility in whether they invest in longer dated credit or shorter dated high ceiling credit. The shorter dated how unicredit isn't really suitable for insurance companies because under the matching regulations on particular, if you have a sort of a ten year, ten year old fifteen year targets investing in ten years or fifteen year high yielding credits liquid how you'll agree there's run off by the time you reach your buyout is actually quite a quite attractive proposition for pension forms. You've also got mork confidence in the covenant of your sponsor in the early years, so you probably be more came to rely on that high yielding a set of the earliest rather than having a very long dated, but just in a general that one thing that has happened is relative. Q. Is there's a lot more money out there chasing ass ends ? Is there a danger job, particularly liquid markets ? Which struck me as siri's of pockets that wants the money. You know, once the smart money discovers there's an opportunity somewhere, and infrastructure debt, everything piles in onda supply demand dynamics mean that the value evaporates very quickly. There's clearly a danger in that, but but i still think there are there are attractive pockets of markets that a said earlier, attractive to institutions such insurance companies, the banks don't interested in pensions, khun still exploit, but that just turns me on more junior trenches where pension funds couldn't take advantage off being pension from rather than insurers or or banks on dh andi, i think i mean, they are much more natural hills of these sorts of assets, they don't have the same liquidity requirements as long as the are going to pay out in time t meet the benefits in ten, fifteen years time that they're natural homes will be nothing else very quick point in that that's that's one of the things that this scene is our clients that's them when it comes to liquidity point that you just made about liquidity approach helps a lot is a multi asked approach where you have flexibility during the deployment time to select best opportunities across the range of private debt markets, for example, so it's tio maximize any kind of disk adjusted returns and also speed up time to deploy capital so multifaceted private debt strategist is something that we see it does kind of growing. Is there a danger that makes you, if you're a multi acid provider, a jack of all trades and master of none ? Because you keep having to run dip all around these liquid areas, finding essentially finding new stuff the whole time ? Absolute depends on the governance and you're set up so it's not here to talk about that. We've invested a great deal of detail, but it said we managed twenty, thirty billion or facets across six seven different asset classes, and each class has its own origination seem on the multi acid team, a top actually building parts portis so it's actually set up to do that in the market. Others may not. I think this is the big problem cd in the markets day is how to trustees get the governance in place, essentially act like an insurance company. Inevitably, they have to delegate some elements of that. Then that brings in certain agency problems in terms of how could be sure that a particular provider is probably best in class solutions. And i think that's a really tricky problem, particularly smaller schemes. I think that i think it does really small schemes. It can be real challenge, i think, inevitably, that will lead some level delegation or just the desire to buy out soon as possible. Yeah. It's a good point. I think i think you do definitely seeing that in the space. People wanting last munchers, i think because it's, whether it's delegated our weather, there is a van there talking about l d i see d i bringing those two things together. They're not exclusive. It's. Good. If they can talk to each other and see what the others doing in terms of completing a monday. So i think whether it's fiduciary that's, the governor's decision, isn't it ? If you look at managers, you do want amounts of that can do ideally your l d ie under cd together. And if they can do more of the asset portfolio, then areas well, but it's. But to get that money, your diversification, i think, you know clients still need to think about that. It's a tricky one very quickly. Fun question on the liquidity mark, how long does it take to deploy the money ? Is there a danger that you could take a large sum of money off pension scheme than thinking my goodness take three years to get ? Yes, an interesting question if you think back to historically and i think we've all been the space corps back five, ten years ago, he said, well, pacey schemes got long time horizon, they can we deploy it ? I think the important bit is, as bar said, to make sure it's not just sitting in cash, you're actually continued to ambassador and if you're truly looking for a self sufficiency portfolio, then you have that time to actually deploy the capital. I think ifyou're thinking by in the next five, ten years, then no, is that something you really want to be getting into ? Even if it's got the qualities that you think are right for your pants scheme flexibility turns out of i'm going to say this expression fools rush in and that's been the lesson cd, so you kind of rush to get it in. Place and compromise. You live with it for an awful long time again, it pays to have a very clear objective because then you know how patient or not you want to be. The important thing is not to fool yourself into thinking you can get in some these complex liquid asset classes sooner rather than later. So it pays to really challenge your asset managers say, is that what you really mean ? Because you don't want to be disappointed, boris. Yeah. I just wanted to talk about the protection time to deploy points and expanding with john was saying, the more flexibility you have within the parameters. The first of the deployment is likely to be so it's that's. One of the key considerations. Obviously, if you're chasing you no longer day that fixed assets that old insurance to buy time to deploy will be very, very long. On the other hand, if more flexibility introduced the kind of the more the more the first deployment. John, i suppose the flipside of liquid asset is if you buy one and it goes horribly wrong. Nobody's gonna want to buy it off you. How do you, how diversified you need. Your portfolio to bay two reduce really you ? Certainly you certainly want to diversify your your your liquid us allocations so you can't rely entirely recovery. One thing, but what a diversified look like twenty different bonds in terms of, we're not just bonds, but asset classes set. So you were you, would you would. A lot of these are limited partnership type structures, where the emotional, the money we'll create a portfolio off twenty fifth, fifty, fifty underline bonds. But then you would also want to diversify the type of private asada's. Well, so you won't. Maybe providence instructed dates. Direct lending will state that all these sorts of areas to give you a diversified exposure teo, across economic drivers. Out of my way out of prison cons of buying long term cash flow versus short of eight to ten years that john was with the long term assets they're great because they give you long term cash flow sea of certainty returned for a much longer period of time. The pros and the advantages of a short term approach is he just gives you that extra flexibility and after much higher short term returns the downside with the long term you kind of it's locked in and it's done, there could be a degree of regret brisk, but the downside with short term is you might regret risk give conditions of worse when you come to redeploy that capital once they've matured, i think the learning lesson is you need to find the right balance in his fit with your objectives, really my mantra, we need to diversify across both of those to find the right the right portfolio for a particular client, but ideally you'd look for short is a sense that you don't need to redeploy you. So in the maths of cd is this forty years, forty year at it with the one percent spread is good in cd i terms is a ten year old with a four percent. So so something that delivers the spread over a short period you would hopefully once it's delivered that just usual. The astros, houston. Just investing guilt after i think, as you said, i think the governance having sight of your governess for thirty, forty years becomes a you know, real problems. The last couple years tells us that so i think it is. Do you front load your rest ? Do make sure you have a liquid assets to do the front then, but again, there's lots of attractions to those longer diddle assets. Ifyou're looking self sufficiency. Then you know it's a lot of attractive called. He said that you want in your portfolio. Okay. But then is this comes out an argument about whether now is a good time to be taking on to be taking front, loading the risk. Fine, you know, they're so here's where that might be a better time to do it another well, yes, but we've also been saying that the very long let us it's looking, looking expensive as well. So i mean, you can play that argument both. Ways that would you really be wanting to buy a forty year asset on such a such a things ? Breadwinning twenty years time, you're still of the twenty years you've covered in which weak on dh, you've locked it in a quite a narrow spread, and in terms of the incumbents being whether you go long or short, how much of this stuff is floating, right, particularly liquid space and how much is fixed, right ? How does that affect your thinking ? It is obviously a liquid assets huge universe just to make it manageable. This conversation, if you look at them assets, could be suitable for cash during the mist and strategies they need to meet. Two defining characteristics be highly predictable and comes to the actual cash flows that generate on the security needs to be hi, sir. Typically, the success will be seen in security, investment grade or thereabouts in quarters. So it's an and if you look at the universe, facets very touched on the long and say ten years plus so that's, where insurers typically operate and more more pension schemes looking at that space so it spreads a contract and there's a lot of money. Chasing opportunities and if you look at ten years, we'll lower historically that that was the main of banks so it's an because of banks and still is it's typically floating rate on longer ? They typically fixed so it's it's just the function off client demands and who actually provide the capital just to give an example. If you look a tte example infrastructure debt market in the uk city security investment grade staff last year, around twenty billion of new deal's done on out of this twenty billion deals on the five billion deals were suitable for insurance, so the rest of the day of the rest is kind of a lot of it was floating summit was fixed, but it's it's kind of gives you an idea off kind of relative relative sizes. And if you look across different asset classes, i'm sure general comments from his perspective. Marcus well, but it's a real estate finances well, so it's kind of fixed longer ends floats in short trends, so the short grass it's typically tend to be floating. Rate was fixed and also there's a higher dispersion in terms of credit quarter team was longer and typically great. Shorter there's a lot of different type, of course, but that reinforces the importance of integrating elia with ceo because if you integrate all the air, you don't really care if an asset is floating rate or fixed. If it's floating you just you just put put a hedge on top of the floating rate. So so you could be agnostic front from from a cdo perspective. As long as you haven't held their strategy, i would argue that today the most optimal way access private assets is going down short maturities and using uld i convert the into fixed or whatever you want to convert it into, but it sze conjunction of failure and flexible approach from mrs thank john. How do you work out how these illiquid asset classes which operation stressed in environments ? Because a lot of them seem to be constantly being told a new investment opportunity. So what's the track record ? How do you know if you look at it is you can look up various crashes and same with bond markets have an idea. What do you do with that ? Goes about point about security, about security and certainly certainty and reliability off the cash flow you like a negatory equity, which have dividends that might or might not be paid. You would expect to have some sort of seniority with these asset classes, and you be concerned with these situations where you wouldn't get the coupons to do to you. But i mean, apart from that, you really you focused on the receiving those coupons. So you really, really from a risk perspective, concerned with stressed, stressed to the actual payment, not not not stresses to the valuation of these, but yet the extreme die inside and the cd i actual solution can be quite bad. So as mustard's unlikely. I think you know, investors do need to be aware of that extreme die inside compared to all the solutions. Because where you get lost in default risk, you want a good man's where they can spend a spot good cos there's not going to be lost a default risk, but if we move into an extreme situation with his loss accompanies default, thank you. They'll become a question for c d i, but that just the question of diversification because because because diversification is about diversity, diversifying across the underlying economic exposures. You have just the same problem with equity markets collapsing in those sorts of scenarios. The important thing is we got everything in real estate, so you have got everything in in in in, in the last it is actually making sure that you're looking across the whole waterfront also do most things nationally as well. Well, given that if it goes wrong, it's a horrible time, it's a really horrible time for it to go wrong. Do you ? Do you advise clients ? Tohave ah, sort of insurance portfolio insurance is probably the wrong word way do lose lose something here, guys, we've got something in the tank to try and play catch up. Yes, a few themes on that, so you need to be taken in the context of the overall strategy is not just investment both of funding in the covenant's. Andi needs to make sense in the round. I think we need to be careful so well that we don't kind of test these portfolios against a doomsday because even asteroid hits a planet is a ll portfolios looked pretty bad, and i think that's important is we're talking about where we see mass defaults on credit. Is a very scary scenario for everybody, but nevertheless, you need to really understand and have a proper framework for understanding those risks and naively and i think i can go a long way with a sensible level of prudence built into the model that's, what we really recommend. And also, when it comes to city it's not buying forget buying, maintains its something john touched on the point of maintaining a certain characteristics around your reciprocation risk exposure, maybe credit ratings and obviously monitoring andrea acting if situation changes thiss part of the part of the government's way more cynical, he said, america trying to maintain that may look, is it ? But, yeah, i'll tell you, great mark, we touched on we mentioned covenants, a couple of tires, but can you just give us a little bit of how important the strength of the employer covenant is toe what you could do in yes, it's a brilliant question. I mean, in the end, the strength of the covenant is actually the key risk. I think we'd talk about liability during the best interest rates inflation, but it's, the sponsor covenant we've seen over the last couple of years and i think trustees having that awareness of worse a sponsor today in terms of government, they regularly assessor, but also even with the five ten year view, we've talked about it already. You cannot be certain on the strength of your covenant, so you just need to have an awareness that that's possibly something that you will not have to back. You should the likes of a cd i pour for you, girl in the future most wants shares on the market innovations were saying, so convention it was kind of seed it's kind of you could do it yourself or you can pass it's one insurance company do it through a whole community. We're seeing more more action that middle space so party's been willing to provide capital in return for some of the losses, so sharing some of the upside. So all we're finding is you can slice and dice your wrist to meet your particular situation, and i think that's just going to grow that market going to develop so investors have a wide range of choice that's managing the risks in a very holistic way. They were almost out of time, so it got through a lot of the last forty minutes, i want to get a final thought from eat you out of everything we've talked about today, john x, if there's one message from that, you'd want to leave people with what would it be ? Tio, i think the diversification message is important on disorderly. The integration between cd and ld is a crucial part of this. Yeah, i think it's the fact that, like we said already, this is a really into it of type portfolio for trustees to understand. So i think once you get in places a bit of setting it up, but then we'll go in place. The governance can actually be quite easy for the trustees you passed to the manager. No, thank you. What i would say is we're living through a time of great innovation on biff you're bringing presents with just a single solution really challenged that because there's a very wide range of things other in developments or with those now on dh, there might be a better way of solving your particular problem. Flores i'll just say that obviously start the and game in minds more backwards, there's a framework to get to the city. I is ineffective, too, in the cool kids, that's, all pension schemes should consider. We have to leave it there, gentlemen. Thank you all very much, indeed. Thank you for watching from all of us here. Goodbye for now.