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Pension funds invest in gilts (UK government bonds) due to their ability to match liabilities, through their interest rate and inflation linkage. However, insurance companies, which take over the management and payment of members’ pensions during a buyout, traditionally prefer higher-yielding assets.
This shift in investment strategy as schemes go through buyout could affect the demand for future gilt issuance, gilt prices and swap spreads (the difference between the yield on an interest rate swap and a government bond of the same maturity).
Read more in our new ‘Expert Investor’ paper below:

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