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Liability Driven Investments..

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  1. #51

    Join Date
    Oct 2021
    Posts
    422
    Quote Originally Posted by Sith:
    Just a few facts:
    A pension fund is usually either managed by (multiple) asset managers or if they are big enough they will have their own investment arm.
    The asset manager is only allowed to invest in securities that are stipulated in the agreement with the client (this includes derivatives, hedging, margin etc...)
    Securities are always held with a custodian.
    And pension funds (at least in the west) have very strict reporting rules to the regulator.
    Here is another fact:

    Pension funds lost a lot of money thanks to subprime assets in 2008.

  2. #52

    Join Date
    Oct 2010
    Posts
    23,622
    Quote Originally Posted by qhank:
    Here is another fact:

    Pension funds lost a lot of money thanks to subprime assets in 2008.
    Here's another fact - gilts are not subprime investments.

  3. #53

    Join Date
    Sep 2022
    Posts
    501

    The fund managers will do their best to manage the risk but it will never be 100%. TheBrit thinks this is box standard risk under LDI and no need to overworry about one off freak market movements. Apparently there are 10-20 other ppl who share his views and currently running your pension fund. I think different and seriously begging ppl not to let them do more of this with your money. The risk is not as remote as it sounds, it happened in 2008, every now and then for the random fund and it just happened last week.

    Perfectly healthy and solvent funds have gone under in hours because they could not find liquidity quick enough to absorb market movements. When they firesale assets under margin call, these are sold in big amounts asap to then highest avail bidders. Traders and normal investors make their own guesses to try and profit from the market and when they see block sales like that, they might guess there is a margin call on a position. Gilts that are known to be held mostly by pension funds? Maybe it's a good time to short the pound because I think it'll drop soon. It is market risk they cannot manage no matter what they do.


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