UK money funds draw ‘gigantic’ inflows as pensions build up war chests
Sterling money market funds have gathered £53bn in just a fortnight as UK pension schemes rush to build defences against market volatility before the Bank of England’s emergency bond-buying programme ends on Friday.
The UK pensions industry has been in a dash for cash to avoid a fresh liquidity crisis if there is a repeat of the chaotic moves in the gilt market caused by chancellor Kwasi Kwarteng’s package of unfunded tax cuts in his September 23 “mini” Budget.
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.
Schemes had also encountered multiple “pinch points and blockages” that had slowed their efforts to raise cash, said Nikesh Patel, head of client solutions at Van Lanschot Kempen, a Dutch private bank and LDI investor.
“There have been enormous strains on the resources of asset managers, consultants, banks and scheme trustees. The financial sector is simply not geared to dealing with simultaneous urgent requests from thousands of pension schemes,” added Patel.
This story originally appeared on: Financial Times - Author:Adrienne Klasa
