Written evidence from Cardano LDI0072

1.      How often you are communicating to clients, whether you are systematically communicating to all clients, and at what lag to the actual data.

Our LDI mandates are run as part of full Fiduciary Management (FM) mandates, where there is a large degree of delegation to Cardano to oversee the day-to-day operations. As such, our standard LDI reporting frequency is quarterly. The LDI information is provided within comprehensive quarterly monitoring reports covering numerous other areas such as performance, funding level progression, portfolio and risk positioning. These quarterly monitoring reports are provided to all FM clients, generally 4-8 weeks after quarter end.

During the gilt crisis, when additional communication was required, we communicated with clients much more frequently. This was generally via email (and on the phone) once or twice a week throughout late-September to the end of November.

Moving forwards, to allow clients greater access to data on their LDI portfolio, later this year we plan to roll out online reporting which will provide daily data. This service will be provided to all FM clients where Cardano manages the LDI assets in-house.

2.      Whether the data you are communicating includes:

• The total level of collateral resiliency (split between holdings within the LDI fund and additional holdings with the manager)

Yes, we provide a total collateral resiliency (noting that all assets are held by Cardano as the FM, so there is no split between holdings reported with the LDI manager and with other managers).

• The distance in terms of basis points to the next collateral call and how large this is likely to be

As we are the FM, collateral calls are an internal rebalancing decision over which we have delegated authority and which we may exercise flexibly taking into account a range of portfolio management considerations. The concept of basis points move to next collateral call is more relevant if clients were to invest in commingled pooled LDI funds or under different operational set ups where the FM does not have oversight over other Scheme assets. Hence, we do not communicate the distance to the next collateral call.

• Any parameters / thresholds they are using for a red-amber-green system to guide clients

As with the previous answer, the holistic nature of the recapitalisation process means we do not employ a red-amber-green system. Having said this, we monitor collateral levels for clients and rebalance between LDI and other assets on a regular basis, taking special actions if collateral levels get particularly low noting that clients now have higher collateral sufficiency levels at a neutral asset allocation versus pre crisis.

February 2023