M&G has launched a new insurer-backed run-on solution for defined benefit (DB) pension schemes, securing a £400m mandate from an unnamed UK scheme for its Cashflow Driven Investing+ (CDI+) offering.
The mandate marks the first transaction for the new solution, which combines M&G Investments' asset management expertise with M&G Life's insurance capabilities to help well-funded DB schemes generate additional value while retaining flexibility over their endgame strategies.
CDI+ is designed to reduce the amount of assets schemes need to hold to meet liquidity and collateral requirements, allowing a greater proportion of their portfolios to remain invested in higher-return-seeking assets for longer, including private markets.
M&G said the solution would let trustees pursue higher returns while maintaining confidence that pension payments could continue to be met, including during periods of market volatility.
The offering combines M&G Investments' experience in managing assets to meet future pension payments and hedge inflation and interest rate risks with insurance-backed liquidity support from M&G Life.
According to M&G, this approach could provide an alternative for schemes considering running on their assets to generate additional value before eventually pursuing buyout.
M&G noted that CDI+ would expand its range of DB endgame solutions, which already includes self-managed and delegated run-on arrangements, bulk purchase annuities (BPA) and other consolidation options.
M&G Investments head of pension solutions, Gurbani Swanni-Leach, said: "CDI+ brings together the best of M&G's investment and insurance capabilities to create a new insurer-backed run-on solution for defined benefit pension schemes - and potentially consolidators like Superfunds and master trusts.
"As trustees look for ways to generate additional value from their assets while retaining flexibility over their long-term plans, CDI+ helps schemes keep more assets invested while giving trustees greater confidence they can continue meeting member payments, even during periods of market volatility.
"This is another example of how M&G's integrated business model can support innovation in the evolving pensions market."
M&G Life managing director, corporate solutions, Kerrigan Procter, added: "By combining M&G's heritage and track record in fixed income investing with M&G Life's insurance capabilities, we have created a solution that helps schemes balance growth, security and flexibility.
"CDI+ enables schemes to invest like an insurer, with an insurer.
"Alongside our bulk annuity offering, CDI+ demonstrates how M&G can support schemes throughout their journey, from running on assets to securing member benefits through to buyout."
