Treasury & Asset Management
Prospects
Treasury
The primary focus of our Treasury operations is to manage the Group’s funding and liquidity. The dislocation in financial markets which commenced in the second half of 2007 is expected to continue to be a feature of financial markets, particularly the term markets, in 2008. In recent years, prior to the dislocation in financial markets, we have lengthened the maturity profile of our wholesale funding and diversified the types and sources of such funding. This has enabled us to operate effectively in difficult financial markets and will give us the flexibility to source funds in 2008, at appropriate prices, consistent with our business requirements. As term markets recover, we will continue to ensure that the profile of the funding portfolio is appropriate for our longer term business plans.
Treasury profits were affected by negative fair value adjustments to debt securities in 2007. We expect these adjustments to both the income statement and balance sheet to reverse out over time as markets recover and/or the debt securities reach maturity.
We will continue to be selective in issuing commercial paper at appropriate spreads from our ABCP conduits Grampian and Landale or fund the conduits via the repo markets or our own liquidity lines as appropriate.
Treasury also provides services to the Group and to the Group’s customers. We continue to invest in our capabilities to deliver a top quality service and performance. Access to Group customers, product innovation and our strong standing in the market underpins our confidence in our business model. Our cautious approach to products and services remains unaltered.
Asset Management
Within Asset Management, Insight’s award winning LDI and Fixed Income teams are ideally placed to win more new business in 2008 as pension schemes continue to look for solutions to de-risk their portfolios. We now have the absolute return and equities skills to provide sources of relative out performance for pension schemes and will seek opportunities to deepen our relationships with existing clients, with these solutions. Insight will also seek to further diversify revenue streams by exploiting strong investment performance in other asset classes and expanding further into new European markets. Our retail strategy has been significantly refreshed in 2007 and we are confident that in 2008 we will have significant flows from retail investors, either directly or via third party distributors.
Invista remains focused on deploying the balance sheet capital raised at IPO in September 2006 and will continue to investigate new real estate markets which it believes present the potential for superior investment returns.