Trustees urged to adapt and remain focused a year on from LDI crisis

Pension scheme trustees must remain focused on what is best for members whilst adapting to ‘new waters’, 12 months on from the liability-driven investment (LDI) crisis, Quantum Advisory has stated.

The firm noted that while trustees and schemes were starting to adapt to the different landscape, member outcomes must remain at the forefront of their thoughts.

“The events of the gilt crisis have meant that trustees are adapting to, and investing in, a totally different landscape,” commented Quantum Advisory senior investment analyst, George Scurr.

“If we look at defined benefit scheme portfolios, many trustees are de-leveraging their liability matching allocations given the focus on LDI resilience.”

Scurr highlighted that liquidity and collateral management have also become more material issues, with this change occurring whilst the Chancellor, Jeremy Hunt, is encouraging pension schemes to allocate more private equity to support venturing enterprises within the UK, particularly defined contribution schemes.

Furthermore, the funding position of many schemes, especially smaller schemes, changed “drastically”, Scurr stated, which has left them in a far stronger position than they were a year ago.

“So, trustees have been left considering their long-term funding objectives in more detail - including whether their scheme can secure members’ benefits with an insurer,” he continued.

“The bulk annuity market has experienced unprecedented activity in this period because of this.

“To fully benefit from this new environment, trustees have several options depending on their schemes’ funding levels and objectives – these include de-risking, reviewing flight paths and asset allocations, or indeed changing their providers.

“Navigating these new waters requires adaptability but the focus, as always, remains what's best for the members. We’ve also got the Autumn Statement approaching, so let’s see what that brings.”

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