You don’t have to be the first man to climb Everest or the woman who discovers X-Rays to be a pioneer. You DO have to be prepared to step a long way outside your comfort zone in the face of intense criticism and scepticism from a crowd of well-meaning bystanders.
In my book, that makes Paul Cooper a pioneer. In 2003, he was the first person who agreed that it made sense to fully hedge a pension scheme’s long term liabilities against the risk of a catastrophic fall in the real yield, and took action. Paul was the actuary at Friends Provident and at 10:45a.m.on 2 December 2003, having won over the trustees of Friends Provident Pension Scheme AND the board of the company, he called me and said “We’re ready”.
Everyone on the sidelines said he was nuts. I had made 300 impassioned “Hedge the Real Yield” presentations in the previous two years and no-one was prepared to be first up. “The Real Yield is bound to rise not fall”. “Pension schemes will never use derivatives”. “We don’t want to be first”. “Longevity risk is way more important than exposure to the real yield”. “Equities are the problem, not interest rates or inflation”.
Eight long, bitterly hard, years later, Paul Cooper’s gutsy decision speaks for itself. His lonely pioneering walk along the edge saved Friends Provident Pension Scheme £200 million.