Committee to question regulators on liability-driven investment
The Industry and Regulators Committee will hold a session with the Chief Executives of the Financial Conduct Authority and The Pensions Regulator on the use of liability-driven investment (LDI) strategies by defined benefit pension schemes, following their role in recent market turbulence. The Committee will be questioning the regulators on how they oversee the risks associated with the use of LDI strategies and the extent to which pension schemes should be allowed to borrow or use derivatives. The Committee will ask the regulators whether they collect sufficient information on levels of leverage within LDI funds and whether they have the remit, powers and levels of co-operation between them to ensure proper oversight of these risks.
Meeting details
At 10:30am: Oral evidence
Work
The use of LDI by pension funds (Non-inquiry session)
Chief Executive at Financial Conduct Authority
Wholesale Director Sell Side at Financial Conduct Authority
Chief Executive at The Pensions Regulator
Investment Specialist at The Pensions Regulator
Possible questions include:
- Who holds responsibility for overseeing systemic risks in the pensions sector? Do the relevant regulators work closely together to ensure that nothing falls between the cracks?
- Will the use of LDI, and particularly leveraged LDI, be a bigger part of your regulatory oversight now?
- To what extent are pension schemes prohibited from borrowing, except for short-term liquidity purposes? Is it right that pension schemes are being allowed to borrow for hedging and investment purposes?
- What actions should be taken to avoid a repeat of recent turbulence in the gilt market due to LDI exposures?