IFoA SP5 case studies
IFoA SP5 · Put your knowledge to work in context.
SP5 Investment and Asset Management is a Specialist Principles exam within the Institute and Faculty of Actuaries (IFoA) qualification structure. The IFoA describes itself as the professional body whose curriculum, exams and learning resources support every stage of an actuarial journey, and its site lists practice areas, research and events spanning investment work - including sessions such as "Investment actuaries in OCIO: Skills, roles and opportunities". The IFoA SP5 case studies are 5 cases and about 3,217 words.
1LDI Collateral Call and the Eroded Hedge
A UK defined benefit pension scheme has liabilities of £1.4bn on a gilts-plus basis and assets of £1.15bn, a funding ratio of 82%. The sponsor is a mid-sized manufacturer with a weak covenant and no appetite for further deficit contributions.
687 words, about 3 min2Matching Adjustment Eligibility of a Callable Solar Bond
A UK life insurer writes bulk purchase annuities and manages a £3.2bn matching adjustment (MA) portfolio with an average book yield of 4.1% and a Solvency II coverage ratio of 145%. The investment committee is considering a £250m allocation, 7.8% of the MA portfolio, to 12-year fixed-rate sterling-hedged solar project bonds issued by a single special purpose vehicle.
640 words, about 3 min3Endowment Illiquidity, Denominators and Capital Calls
A UK grant-making charity holds a £260m endowment and applies a spending rule of 4.5% of the three-year average market value, plus 0.6% investment costs. Its objective is CPI plus 5% over rolling ten-year periods.
574 words, about 3 min4Hedging a Credit Portfolio: Cash Bonds versus Index CDS
A UK credit manager runs a £900m sterling investment-grade corporate bond portfolio benchmarked to a broad index. Modified duration is 6.4 years, spread duration 7.2 years, yield 5.4% and average rating A-.
681 words, about 3 min5Currency Hedging with Asymmetric Carry and Correlation
A UK multi-asset fund with £1.5bn of assets holds 45% in overseas equities: 20% US, 12% euro area, 8% Japan and 5% emerging markets. Currency exposure is currently unhedged.
635 words, about 3 min