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Cardano Advisory launches Discover: AI powered covenant

Cardano Advisory, part of Cardano, the pensions advisory and investment management specialist, today launches Discover. A new AI-based technology, Discover will transform the way covenant assessments are provided to smaller schemes or scheme sections.

Using Cardano’s unique database of historical covenant assessments, along with AI technology, Discover provides automated assessment and reports for schemes to analyse their covenant strength.

Discover has been designed for schemes where high-level covenant analysis may be more appropriate, including schemes with assets less than £50m and simple covenant structures. Discover can also conduct AI led reviews of the underlying employers of sectionalised or non-associated multi-employer schemes, including local government pension schemes (LGPS).

Based on both key quantitative and qualitative factors, Discover provides an employer covenant rating, examining the main drivers underlying the rating, benchmarking rating metrics, and providing corresponding recommendations.

As well as giving comfort that employer covenant views have been externally validated, the technology can be used to support triennial valuations, scheme return submissions, ongoing monitoring, and risk assessments.  It can also be utilised to explore the covenant impact of ‘what-if’ scenarios, for example an improvement in the sponsor’s trading or an increase in its debt.

Discover will enable Cardano to build upon its existing market-leading pensions covenant services for schemes of all sizes to create a truly bespoke and cutting edge advisory offering. 

Felix Mantz, Director, Cardano Advisory said: “Discover is a further step towards modernisation within the pensions industry, as we continue to harness new technology to build tools and solutions for schemes. With our  wealth of data, we can increasingly harness this through AI to bring innovative risk management solutions to trustees, employers, and members in a cost-effective manner.

“Traditional covenant reviews involve in-depth analysis from a team of dedicated covenant professionals and can be out of reach of smaller schemes due to costs. Given the importance of covenant to member outcomes, and with an increased focus from the Pensions Regulator on covenant, we believe that Discover will make external covenant analysis more accessible and affordable to smaller, simple, or sectionalised schemes.”

A Professional Trustee who has used the tool said: “We used Cardano’s Discover service to rate the covenant of a small c.£10m Scheme, as it provided appropriate guidance, proportionate to the size, scale, nature and complexity of the activities of the Scheme, at an acceptable cost. The AI Discover rating and recommendations enabled us to progress valuation discussions, and the identified rating drivers informed our ongoing covenant monitoring.”