Publication
Global rules on foreign direct investment (FDI)
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
United Kingdom | Publication | February 2024
On February 7, 2024, the Work and Pensions Committee of the House of Commons published a lengthy report submitted by the Regulator on the impact DB schemes of the liability-driven investment (LDI) crisis in autumn 2022. The Committee published a report about the episode in June 2023 and asked the Regulator to produce a detailed account of the impact.
The Regulator’s report concludes that, while the situation in late September and early October 2022 bought into focus the extent of DB schemes' investments in leveraged LDI, the movement in gilt values and yields over 2022 actually led to a significant improvement in scheme funding, as liabilities fell by more than asset values.
However, the precise impact for individual schemes will not be known until completion of the next triennial valuation process. Some individual schemes may have experienced funding deteriorations during September 2022 on account of high levels of hedging, the cost of losing and re-acquiring hedging or following discounted selling of assets to meet collateral requirements. While the report models these impacts, the Regulator has no data on the extent and scope of discounted sales for specific schemes.
Since the LDI episode, the Regulator says it has improved its monitoring of such products, and it now receives weekly data from the five UK fund managers that hold almost 90 per cent of the DB market in leveraged LDI assets.
The Regulator's ongoing work includes:
Publication
Cross-border acquisitions and investments increasingly trigger foreign direct investment (FDI) screening requirements.
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