Written evidence from Schroders LDI0082

Please find below our response as requested.  We hope this in the form/content that you were looking for.

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

Communication of the updated liquidity thresholds (I.e. the required resilience) for LDI Solutions, split out by different access models (i.e. pooled/segregated mandates) was communicated to our pension fund clients trustees in early October 2022. These remain unchanged, but are reviewed regularly. 

Further correspondence with the consultants/advisors to the trustees has confirmed these since then. The majority of our clients have close dialogue with their advisers when contemplating our stated liquidity thresholds.  Please note that for our fiduciary management clients we are the client's advisers and have discretion to change the make-up of their portfolio.

We systematically report information on liquidity thresholds to our pension fund clients at least quarterly, and more regularly upon request. This is dependent on the pension fund client’s individual need, given the varying governance cycles of our clients and the importance of having up-to-date information to inform their decision making process.

Data lags are usually 1 day, meaning our liquidity communication can use the close of business from the previous day, the amount of monies to reach certain stress levels will naturally vary depending on market conditions. Our LDI client reporting is expected to evolve over time depending on client needs, our focus generally on improving our service, and any developing regulatory requirements following the recent crisis.

• 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 – This is shared via client data requests

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

Yes. This is shared via client data requests. We have monitoring procedures such that we notify clients if certain liquidity points are reached.

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

We share the minimum level of resilience for each component part of the threshold with each client/consultant as part of ongoing engagement. We do not currently use a red-amber-green rating to guide clients, rather we provide the raw material for the consultants to use to input into any client-based RAG ratings. We provide early warnings on liquidity points as agreed on a client by client basis.

March 2023