Running_Man
Thinks s/he gets paid by the post
- Joined
- Sep 25, 2006
- Messages
- 2,844
It is extraordinarily concerning having read what Black Rock has sold to all the pension funds in Great Britain. 2/3 of the pensions have invested in what is called the LDI pension scheme.
The short version is the pension has government bonds it sells and in a repo agreement agrees to buy back a future date for a fixed rate, earning as much as bonds were paying in the low interest rate enviroment of 2016-2021.
With the cash in hand for the sale of the bonds, pensions would sell on average 4X times resulting in a 4X cash flow for the pension fund to the point of where these derivatives were 1.8 trillion in value inUSD in Great Britain's pension out of a total pension fund in Great Britain of 6.1 Trillion in USD or 30% of the average pension funds portfolio. This made up the fixed asset portion of the funds, freeing them up to invest heavily in hedge funds and growth stocks.
This situation is dire and is going to result in tragedy in the UK unless interest rates are reversed to the downside which is going to inflate the home prices. At present 33% of all the debt issued by the UK is held in derivative form by the pension plans under these LDI plans.
This current lull is a temporary reprieve and going to be a major blow for Great Britain. Most pension funds are going to be forced to liquidate stocks and bonds to cover the LDI exposure.
Government is hoping for a stop in the increase to allow current deductions from future pensioniors paychecks to backstop the LDI but that merely means a transfer from the pension fund to the likes of Black Rock who have issued most of these products.
What has been done to the pension funds of Great Britain is terrifying experiment in investing
https://www.reuters.com/markets/eur...ven-investment-strategy-explained-2022-10-04/
The short version is the pension has government bonds it sells and in a repo agreement agrees to buy back a future date for a fixed rate, earning as much as bonds were paying in the low interest rate enviroment of 2016-2021.
With the cash in hand for the sale of the bonds, pensions would sell on average 4X times resulting in a 4X cash flow for the pension fund to the point of where these derivatives were 1.8 trillion in value inUSD in Great Britain's pension out of a total pension fund in Great Britain of 6.1 Trillion in USD or 30% of the average pension funds portfolio. This made up the fixed asset portion of the funds, freeing them up to invest heavily in hedge funds and growth stocks.
This situation is dire and is going to result in tragedy in the UK unless interest rates are reversed to the downside which is going to inflate the home prices. At present 33% of all the debt issued by the UK is held in derivative form by the pension plans under these LDI plans.
This current lull is a temporary reprieve and going to be a major blow for Great Britain. Most pension funds are going to be forced to liquidate stocks and bonds to cover the LDI exposure.
Government is hoping for a stop in the increase to allow current deductions from future pensioniors paychecks to backstop the LDI but that merely means a transfer from the pension fund to the likes of Black Rock who have issued most of these products.
What has been done to the pension funds of Great Britain is terrifying experiment in investing
https://www.reuters.com/markets/eur...ven-investment-strategy-explained-2022-10-04/
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