BNY Asset Management Introduces Liability Management Solutions for Plan Sponsors
BNY ToTALS(sm) Provides Three Unique Approaches Depending on Plan Funding StatusNEW YORK, August 10, 2006 -- BNY Asset Management, the investment management arm of The Bank of New York, has introduced a three-tiered solution to help plan sponsors match their assets to their long-term liabilities. Called BNY ToTALS, or Total Asset Liability Solutions, the solution enables plan sponsors to better protect the funded status of their plans by choosing from three unique approaches tailored to meet their specific needs. BNY ToTALS represents a further enhancement to BNY Asset Management’s growing liability management capabilities.
The Level One approach uses cash flow immunization techniques to minimize interest rate risk, which can be particularly beneficial to frozen and over-funded plans. Level Two involves active long duration management, using a combination of cash and futures to extend the duration of a plan’s portfolio. Level Three consists of a customized derivative-based solution, using fixed income derivative strategies such as swaps and swaptions, to actively manage the interest rate risk caused by the duration gap between assets and liabilities.
“We have a strong track record of providing customized liability matching solutions to our clients. With the introduction of BNY ToTALS, we have created a unified offering to facilitate our clients’ unique pension fund risk management needs,” said Margo Cook, executive vice president and head of institutional asset management at BNY Asset Management. “BNY ToTALS creates a road map for pension plans to hedge liability risk using traditional strategies as well as new derivative-based solutions, depending on the plan’s funded status.”
BNY Asset Management has implemented Levels One and Two for corporate pension plans, particularly in instances where the plan is frozen or the workforce is older and the duration of the liability is closer to that of the assets. Level Three, which uses a duration hedging overlay strategy, has attracted interest from pension plans in a favorable funding position, many of whom are keen to hedge against surplus risk or volatility.
Level Three allows the plan to remain invested in other asset classes such as equities and alternative investments, where return expectations are higher than those for traditional fixed income. The fixed income derivative market offers a liquid and effective way to reduce the volatility of the plan’s liability, which typically has a significantly longer duration than the plan’s assets. This strategy allows a plan to maintain its allocation to other investments with minimal disruption to the overall asset allocation.
BNY Asset Management will be marketing BNY ToTALS to pension plans in the United States and United Kingdom, where demand for liability driven investment strategies has been strong.
BNY Asset Management offers corporations, public funds, Taft/Hartley plans, nonprofit organizations and high net-worth individuals and families a broad range of equity, fixed-income and alternative investment products. With more than $116 billion in assets under management as of June 30, 2006, BNY Asset Management is one of the largest investment managers in the world.
The Bank of New York Company, Inc. (NYSE: BK) is a global leader in providing a comprehensive array of services that enable institutions and individuals to move and manage their financial assets in more than 100 markets worldwide. The Company has a long tradition of collaborating with clients to deliver innovative solutions through its core competencies: securities servicing, treasury management, asset management, and private banking. The Company’s extensive global client base includes a broad range of leading financial institutions, corporations, government entities, endowments and foundations. Its principal subsidiary, The Bank of New York, founded in 1784, is the oldest bank in the United States and has consistently played a prominent role in the evolution of financial markets worldwide. Additional information is available at www.bankofny.com.
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