Diversification of LDI liquidity buffers sparks debate
Funds using credit assets to top up collateral waterfall, but some risk managers are sceptical
Liability-driven (LDI) investment funds have built up liquidity buffers beyond regulatory requirements imposed in the wake of the 2022 UK gilt crisis, but pension fund experts question the inclusion of credit assets in funds designed to be part of collateral waterfall structures.
“The underlying problem that started the crisis was the underfunding,” says Magnus Billing, formerly chief executive of the giant Swedish pension fund Alecta. “That problem is not solved by any financial engineering on
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