Legal & General estimates £10mn hit from UK pension fund liquidity crisis
Legal & General has detailed the impact of the pension fund liquidity crisis in September, estimating that its profits would be reduced by £10mn as clients sold higher-fee products to meet collateral calls.
Then-chancellor Kwasi Kwarteng’s “mini” Budget had unleashed turmoil in the gilt markets, forcing pension funds to sell assets to meet collateral calls from their so-called liability-driven investment strategies. L&G is one of the UK’s biggest providers of LDI products.
The FTSE 100 insurer said the “sharp and extreme increase in gilt yields” in the wake of the fiscal statement had materially increased the collateral required. “This caused liquidity problems for some LDI clients who had assets available but could not access them in time to provide cash collateral,” it added.
This story originally appeared on: Financial Times - Author:Ian Smith
