Reuters. BoE Governor Andrew Bailey, speaking in Washington later in the day, said: “And my message to the funds involved and all the firms involved managing those funds. You’ve got three days left now. You’ve got to get this done.” SCRAMBLE FOR CASH
LDI helps schemes match their liabilities – what they owe members – with assets. Pension funds were previously putting up cash to withstand a move in government bond yields of 100 to 150 basis points — normally a huge safety net, but which has been wiped out by some of the most volatile days on record.
Those collateral buffer demands increased to 300 basis points last week, consultants and pension industry experts said. Some schemes have even been asked for 500 basis points this week amid more jumps in bond yields, although that amount remains rare.
The scramble for cash in the 1.6 trillion pound LDI industry, which soared in popularity among Britain’s defined benefit schemes during a decade of low interest rates, is forcing pension funds to dump government and corporate bonds and even to exit from less liquid assets such as property and private equity. Investment manager Columbia Threadneedle said on Tuesday it has suspended dealing in the 453 million-pound CT UK Property Authorised Investment Fund and its feeder fund to restore liquidity.