The UK's Communication Workers Friendly Society is using derivatives to put a floor on performance and appointed Rothschild Asset Management to manage its £80m (€130m) portfolio.
Following the decline in the UK equity market, the Society decided it wanted a strategy that would protect it from further significant falls. Edward Chapman, chief executive of the Friendly Society, said: "We cannot afford the sort of downturns in the equity market we have seen this year, so we have put in place derivative contracts that give us a cap and collar on performance. The FTSE 100 index has to go below 4,000 before we benefit from the collar. The cap kicks in if the index hits 5,325."
