PLSA comments on TPR's guidance for Using leveraged liability-driven investment

Joe Dabrowski, Deputy Director – Policy, PLSA, said: “TPR’s guidance is a helpful resource for pension schemes seeking to make use of liability-driven investment strategies.

“LDI has worked well for many schemes and employers over two decades and has helped defined benefit pensions, in the round, now being much better funded against their liabilities. Nonetheless, it is prudent of TPR to publish guidance on how to manage the potential risks, which were exposed by the unprecedented volatility episode that followed the mini-Budget last autumn.

“The industry has adapted well following those events and schemes using LDI are generally holding additional collateral buffers at the levels suggested in the guidance already. It is important that the guidance is a ‘living document’ and updated as the market changes.

“We note that a ‘standing level’ of 250 bps collateral buffer has been recommended – it is important however that any level of collateral holding should be evidence-based and reflect prudent market risks for the strategy, rather than scenarios, which could be too soft or excessively cautious and come at cost to performance.

“We would like to see further detail on this analysis from regulators on how they will continue to assess systemic risks into the future.”

Mark Smith, Head of Media Relations
020 7601 1726 | [email protected]

Cali Sullivan, PR Manager
020 7601 1761 | [email protected]