
It can’t be long before someone starts discussing LDI-Gate (the turmoil in the gilts market following the Government’s September mini budget), looking for parties to blame. There have been rumours about potential claims against liability driven investment (“LDI”) managers and investment consultants, and pensions celebrities have been summoned to appear before parliamentary select committees to explain the way that LDI works and the role of leverage in product design. Some of the critics of LDI (in the “accident waiting to happen” brigade) have perhaps ignored the wholesale reform of the derivatives market that happened in the wake of the Global Financial Crisis (“GFC”) of 2008-9, which were designed to address systemic risks in the banking sector by introducing central clearing of trades and strengthened margin or collateral requirements. Those reforms were necessary and have served institutional investors well, not least by creating greater contractual certainty between parties.