Managers want power to cut hedges after UK LDI crisis

Pensions trustees baulk at requests for right to reduce exposure to LDI funds “carte blanche”

Fiduciary managers are asking UK pension funds for greater discretion to cut exposures to liability-driven investment (LDI) funds during a crisis. But some trustees are sceptical about handing more power to a group that many believe dumped LDI hedges at the worst moment during last year’s gilt market turmoil.

Pension funds commonly hedge their liabilities using third-party LDI funds that rely heavily on derivatives. When gilt yields rise, as they did last September following the UK’s chaotic