PensionsFirst in U-turn as products fail to sell

LONDON (Reuters) - PensionsFirst, founded by former Morgan Stanley European Vice Chairwoman Amelia Fawcett, has made a strategic retreat after failing to sell any of its investment products.

PensionsFirst launched in 2007 trumpeting a range of products using so-called longevity bonds to help pension fund trustees match income to their liabilities.

But on Monday the company said it had put its investment business into hibernation while it focused on developing for market the risk assessment software, called PFaroe, used to design those products.

Companies are looking to take risk out of their pension schemes as increasing life expectancies make funding positions look fragile. A scheme might hedge using longevity swaps or pursue a full or partial buyout of the scheme by a third party.

The PFaroe project, backed by BlueCrest founder Bill Reeves, will try to sell software which makes it more likely funds will buy PensionsFirst structured products in the future.

If taken up it could also increase the chances of trustees using other pension fund de-risking options, like buyouts, offererd by other specialist firms and banks.

"The more we understood about the lack of risk measurement tools in the DB industry the more we saw both the need and the opportunity," PensionsFirst said.

"As has become clear, the development of the buy-in/buy-out market has been slower than expected, largely due to volatile markets and the lack of means for managers of DB schemes to analyse the value proposition of buy-in and buy-out products."

Pension schemes using PFaroe would be more likely to add hedging strategies to portfolios or increase diversification, generating more fees for their fund managers, said Benjamin Reid, CEO of the PensionsFirst division responsible for PFaroe.