Like Tree20Likes

Liability Driven Investments..

Reply
Page 7 of 7 FirstFirst ... 4 5 6 7
  1. #61

    Join Date
    May 2006
    Location
    Pampanga, Philippines
    Posts
    28,072
    Quote Originally Posted by sarsi:


    We weren't discussing when it will go bust.

    Discussion was abt whether there were actually real losses suffered by PF and if they sold off fund assets to meet margin call. I said yes, TheBrit said no.
    Having lost £500 billion I would think some would be hurting, despite their massive assets. Is any of this showing up in their figures so far?

  2. #62

    Join Date
    Sep 2022
    Posts
    807

    I don't know. Fund stats published by the PF were never part of my argument and imo not to be trusted.

    I believe the last Oct data link sent by TheBrit had a disclaimer in their methodology that said stats don't capture changes in leveraged LDI portfolios. So these movements wouldn't show up anyway.

    Stop being disingenuous, serious amt and in general. I am setting the record straight today only bcos of TheBrit refusing to drop this point and being cowardly and passive aggressive abt it. There's no point and honour in asking questions abt this if you're not that concerned abt the thread topic and just want to make me look like I'm the petty one beating the dead horse.


  3. #63

    Join Date
    May 2006
    Location
    Pampanga, Philippines
    Posts
    28,072
    Quote Originally Posted by sarsi:
    I don't know. Fund stats published by the PF were never part of my argument and imo not to be trusted.

    I believe the last Oct data link sent by TheBrit had a disclaimer in their metholody that said stats don't capture changes in leveraged LDI portfolios. So these movements wouldn't show up anyway.

    Stop being disingenuous, serious amt and in general. I am setting the record straight today only bcos of TheBrit refusing to drop this point and being cowardly and passive aggressive abt it. There's no point and honour in asking questions abt this if you're not that concerned abt the thread topic and just want to make me look like I'm the petty one beating the dead horse.
    No the Brit can be and has been wrong before. He is human. The media at the time was all crisis and the end of the world for pensions. Having lost my pension before naturally I would be interested. However, all went quiet after a few days never to reappear in the news.

    Thank you for the effort to improve your posts. At least now I can understand what you are saying.

  4. #64

    Join Date
    Sep 2022
    Posts
    807

    No matter what the news say now or in future, I call bs on any claims that they, regulator or parties involved were not fully aware, didn't realize real market risk etc. They know for sure. They just assumed the risk would not materialize.

    I didn't know USS was the biggest? or major PF scheme. Found online a while back..
    https://www.uss.co.uk/news-and-views...ldi-strategies

    I am really floored by this, not bcos of the risks Cambridge, Ox and Imp College pointed out if they went ahead w the LDI strategy. But bcos they specifically pointed out that this seemed to be a lot of risk taken for a strategy that isn't necessary nor conducive and likely to be detrimental to asset value in the long term.


  5. #65

    Join Date
    May 2006
    Location
    Pampanga, Philippines
    Posts
    28,072
    Quote Originally Posted by sarsi:
    No matter what the news say now or in future, I call bs on any claims that they, regulator or parties involved were not fully aware, didn't realize real market risk etc. They know for sure. They just assumed the risk would not materialize.

    I didn't know USS was the biggest? or major PF scheme. Found online a while back..
    https://www.uss.co.uk/news-and-views...ldi-strategies

    I am really floored by this, not bcos of the risks Cambridge, Ox and Imp College pointed out if they went ahead w the LDI strategy. But bcos they specifically pointed out that this seemed to be a lot of risk taken for a strategy that isn't necessary nor conducive and likely to be detrimental to asset value in the long term.
    Again though that article by USS in October talks about "short term liquidity issues". Anyway it all seems to have blown over, as would be expected from short term liquidity issues, so I will put it to bed unless you have something recent?

  6. #66

    Join Date
    Oct 2010
    Posts
    23,779
    Quote Originally Posted by hullexile:
    Having lost £500 billion I would think some would be hurting, despite their massive assets. Is any of this showing up in their figures so far?
    Of course it isn’t. That’s the whole point between asset and liability matching. When liabilities go down, plan assets go down commensurately. When plan liabilities rise, assets rise too.

    When bonds sell off their yield goes up, so future pension liabilities are discounted at this higher rate, making the net present value of the liabilities lower. So the pension fund loses money on its bond holdings (assets down) but the funding status doesn’t deteriorate as liabilities have also gone down.

    Same thing happens on the way up. If bonds increase in price (yields fall) then fund assets go up but future liabilities are discounted at a lower rate so net present value of liabilities goes up too.

    It’s more complicated than this in reality but this is gist of it.

    There were issues around posting collateral and mismatches in liquidity (i.e. broker demanding increased margin on Wednesday but funds not being able to sell and receive cash from fund assets till Thursday or Friday). This is a area that is simple to fix and I’m sure a lot of Operations Manuals have been updated to harden procedures against this kind of issue.
    hullexile likes this.

  7. #67

    Join Date
    Sep 2022
    Posts
    807

    We good. USS link separate, generic for thread.

    Qns the College asked USS in their letter.. some here had similar nagging concerns but couldn't really be sure..

     On what basis has USS determined that the current portfolio allocation leaves the scheme with too much risk?

     What analysis has been performed on the ability to manage 37% leverage in highly volatile markets? Please provide specific scenario analysis.

     Is there a compelling need to enact this approach in the short term given the changing Central Bank policies and the investigation of scheme redesign?

    ...we do not believe that the case for further purchase of inflation-linked bonds has been made and we believe the increase in leverage may introduce potentially significant risks into the scheme in a period of high market volatility... The evidence provided by USS needs to go to the scheme’s ability to pay pensions as they fall due rather than just its (wholly theoretical) ability to switch instantaneously to a selfsufficiency portfolio
    Last edited by sarsi; 07-01-2023 at 02:01 PM.

  8. #68

    Join Date
    Sep 2022
    Posts
    807
    It’s more complicated than this in reality but this is gist of it.
    No it isn't. This is exactly how wumao argue. When faced with evidence that basically proves that they were not only wrong but utterly bullshitting their way through the topic, they follow on by arguing along as if yes this was totally within expectation and follow up with their same wrong concept w/o alluding to the fact it's wrong.

    I think you have managed to come off looking right prob bcos you were up against ppl who just got too tired arguing their pt, shackled by their own principles and wanted to portray argument properly w/o using the disinfo style you use, bulldozing over everything that didn't make sense for your claim or ppl who were too kind to have a full on argument bcos that would require completely shredding apart everything you said as cock and bull. I don't feel bad at all for pointing this out bcos you asked for it. Why would you bother fixating on this at all? I gave you no grief, absolutely zero. No snide remarks nuthin. The forum bar 1 person thinks you were right. I don't ever mention it, so why even...the constant dick moves and baits to provoke a fight..

    The mantra of up and down you keep saying like we too dumb to get it. I was not the only one who voiced this out. The LDI strategy is a false construct. It's a policy that theoretically matches assets to liabilities based on market price valuation. The funds adopt this strategy, then go on to make changes to other fund regulations on basis that this policy keeps the funds matched, otherwise there will be a mismatch.

    Gap to self-sufficiency metric
    We believe the proposed strategy is driven largely by a desire to reduce the volatility in the “gap to self-sufficiency” metric which is particularly affected by changes in real (i.e. after inflation) interest rates. (Buying large amounts of inflation-linked bonds reduces the volatility of the metric as, if real interest rates decline further, the value of index-linked bonds increases at the same time as the liability measure increases.) However, in an open scheme with a long time horizon and a strong covenant, there should be no need for USS to move to self-sufficiency, and a premature focus on the purchase of low return assets is likely to lead the scheme to have lower asset levels and less resilience in the future. A risk metric that focussed more directly on USS’ ability to pay benefits as they fall due in adverse circumstances would be a better and more useful approach.
    Link to USS ltr
    https://www.staff.admin.cam.ac.uk/sy...ent_letter.pdf
    Last edited by sarsi; 07-01-2023 at 06:05 PM.

  9. #69

    Join Date
    Nov 2014
    Posts
    458

    The liability driven investments moniker was not the issue with the UK pensions. There's no one willing (I assume, otherwise they wouldn't need to deal with GILTs in the first place) to offer them a hedging contract so they need to hedge themselves. Imperfect hedge = a mismatch of liquidity = trouble when the cash flow side can't spit out cash. But the government can bail them out, although of course there's a small cost.

    But the UK pension scheme is also underfunded, which is a separate issue, and the UK pension is using leverage to make up the gap (which was exacerbated in 2008). From what I understand reading FT and Bloomberg (as my sources), UK pension fund did suffer some actual losses, not just temporary losses, but it's nothing major. The leverage that they need to use made them more sensitive to the margin call, but they have the longer term assets so it was a temporary phenomenon.


  10. #70

    Join Date
    Sep 2022
    Posts
    807

    Yes..moniker not the issue.. a PF doesn't need liability driven strategy at all. It's outlook is only LT..

    BUT since this is the exact thread and my worry then was v much bcos no one seem to realize upfront the noose UK's tied around its neck by investing its PF funds in investments that are only margin traded.. but since the Guardian article said it out loud, I'm still worried but not like before cuz they have notice of the issue. So feel free to discuss and disagree..


Reply
Page 7 of 7 FirstFirst ... 4 5 6 7