UK money funds draw ‘gigantic’ inflows as pension schemes build up war chests | Financial Times

The powerful inflows into money market funds, which act in a similar way to a bank account for institutional investors, are one of the clearest signs yet of how schemes are selling assets in order to build a war chest that they hope will be big enough to weather any new collateral calls.

The pension schemes need quick access to cash since many use liability-driven investment (LDI) strategies to match their assets and liabilities — vehicles that required large injections of collateral after Kwarteng’s fiscal statement sent gilts tumbling. At the end of last year, LDI schemes covered about £1.4tn in defined-benefit pension fund liabilities, according to The Pensions Regulator.Larry Fink, chief executive of BlackRock, a major player in the LDI industry, said on Thursday that it appeared “much of the reconstruction of these products may have been done and the market may be . . . a little more normalised”.

UK money funds draw ‘gigantic’ inflows as pension schemes build up war chests | Financial Times