Schroders has reported a £20bn drop in assets in the part of its business that deals with liability-driven investments for pension fund clients.
In a trading update this morning (October 20), the group said the AUM in its solutions business dropped to £205.5bn on September 30, from £225.7bn at the end of June.
This includes the first week after former chancellor Kwasi Kwarteng’s “mini” Budget, which prompted an emergency Bank of England intervention after spiralling gilt yields led to a near-fatal episode in some pension funds’ liquidity.
The central bank launched an unplanned bond buying scheme and suspended its planned gilt sale after warning of a “material risk to UK financial stability”.
Pension funds were forced to sell liquid assets, including gilts, to meet margin calls for LDIs which are a derivative hedge against rising interest rates.
This caused yields to rise further, increasing the margin calls and raising concerns the sector was beginning a doom spiral.
The BoE’s deputy governor for financial stability, Sir Jon Cunliffe, has since said that some DB pension fund investments in pooled LDI investment funds would have been worthless without the central bank’s intervention.
Schroders expanded its Solutions business with the acquisition of River & Mercantile’s fiduciary arm earlier this year.
Schroders’ assets under management, excluding joint ventures, dropped by £23bn to £614.6bn in the three months to the end of September.
sally.hickey@ft.com
