BlackRock says it is reducing leverage in some funds amid UK pensions crisis

LONDON, Sept 30 (Reuters) – U.S. asset management group BlackRock said on Friday it was reducing the leverage of so-called liability-driven investing (LDI) funds amid chaotic market conditions to British pension funds this week, in order to protect its clients ‘ Capitale.

UK government bond prices fell to their highest level in decades after Finance Minister Kwasi Kwarteng’s first budget statement last Friday, threatening the stability of the country’s pension funds and forcing the Bank of England to intervene on Wednesday .

“Due to the extreme volatility in the gilt market this week, we have worked quickly over the past few days to support the interests of our clients,” a BlackRock spokesperson said in an emailed statement.

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“We have reduced the leverage of some of our LDI funds, acting prudently to preserve our clients’ capital in extraordinary market conditions. Trading in BlackRock funds has not been halted, and BlackRock has not nor stopped trading gilts.”

LDI funds can be multiplied by four, according to industry consultants.

Pension plans had to raise cash to meet collateral calls on loss-making derivative positions managed by LDI funds and used to cover the pension plan’s gilt holdings.

LDI funds themselves were also under extreme pressure before the BoE announcement, according to industry sources.

In a note to clients about its LDI liability matching funds, dated September 28 and seen by Reuters, BlackRock said at the time that it would not proceed with further recapitalization events until further notice.

He also said in the update that he was “closely monitoring debt levels across the spectrum” with a focus on those at risk of depleting their assets.

“For these funds, we will completely eliminate interest rate and inflation exposure and initially hold the asset in cash before seeking to re-establish unleveraged exposure in a controlled manner if future market conditions adjust. “, adds the note.

However, the Pension Protection Fund, a 39 billion pound ($43.4 billion) rescue fund for the pension schemes of struggling companies, has kept all its liabilities covered, without the need to sell pensions. assets, its chief investment officer said on Friday.

“PPF members, and those of the schemes we protect, can be reassured that despite the current market environment, we are well able to continue to pay them and their dependents what has been promised as long as they need to,” PPF Chief Investment Officer Barry Kenneth said in an emailed statement.

($1 = 0.8994 pounds)

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Reporting by Carolyn Cohn, writing by Iain Withers, editing by Elaine Hardcastle and Emelia Sithole-Matarise

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