Pension funds should short shares in their own companies to protect their finances, according to a report into how schemes can better manage their risk.

Cliff Speed of investment consultant Hewitt Associates and John Hawkins, former head of finance at Invensys, said in a report published in The Treasurer: "If the sponsor becomes financially distressed, this will usually be reflected in the price of shares and bonds traded on the sponsor. The trustees can use this to their advantage by short selling the securities."