The collapse of liability-driven investment (LDI), which threatened the country’s pension funds, rightly drew attention to the safety of the financial system.
It is believed that most of the potential problems lie in the less regulated non-banking sector, such as LDI. But one should not imagine that the banks of the High Street are as solid as rock as the enforcers would have us believe.
Former Lloyds chief executive Antonio Horta-Osorio boasted after the financial crisis that he had made the bank safe by replacing billions of pounds of short-term funding with safer long-term capital.
“Authorities are also concerned that private investors in UK finance, who use the highly leveraged model, could be vulnerable to sudden increases in both short-term and long-term interest rates.”
However, we have now learned that in the midst of the hog loans collapse, when the Bank of England feared a cascade of insolvencies from highly leveraged borrowing, Lloyds had high risks – around £52bn – for a “repo” (short loan) . term secured credit) market. Investment banks are not the only ones playing in the casino-like derivatives space.
The authorities are also concerned that private investors in UK finance, who use the highly leveraged model, could be vulnerable to sudden increases in both short-term and long-term interest rates.
There have been some glimpses of stress with Clayton, Dubilier & Rice-owned supermarket Morrisons looking to divest itself of assets.
A survey by mid-cap broker Numis shows that despite the end of low borrowing costs, the private equity that exposed the bottom of the FTSE 100 is far from out of the game.
A survey of 200 leading private equity players shows that the political turmoil has not changed the situation and the UK remains attractive. Some 73% of private equity executives surveyed remain interested in London-based companies.
“An astonishing 92% find London attractive because institutional investors are more likely to sell at the right price and the regulatory environment is less onerous than elsewhere.”
An astonishing 92% find London attractive because institutional investors are more likely to sell at the right price and the regulatory environment is less onerous than elsewhere.
No one can regard the attack of private capital on second-tier British engineering, aerospace and defense companies with anything but anxiety.
It was this paper’s campaign that prevented Bain from taking over LV+’s mutual insurance and pension benefits. The Numis study does show that, despite skepticism about Britain’s ability to finance its current account deficit, concerns about the country’s dependence on the “kindness of strangers” are exaggerated.
For better or worse, the UK remains a lure for investment.
“Pension fund trustees have been so obsessed with closing funding gaps that they have become vulnerable to mercury schemes from pension advisors and investment bankers.”
The disruption to the smooth operation of financial markets after the mini-budget is already being studied by a special Treasury committee.
The consequences for Britain’s defined benefit pension system were potentially far more catastrophic than those for the Mirror Group pension fund when it was robbed by Robert Maxwell, or for BHS, which became famous.
The House of Commons Committee on Works and Pensions correctly launches an investigation into the regulatory system that allowed the LDI to explode. The Bank of England was more than aware of the vulnerabilities back in 2018 and stress tested the system. It is unclear whether the Pension Regulator has succeeded in controlling the complex funds at the heart of the system.
Pension fund trustees were so obsessed with closing funding gaps that they became vulnerable to mercury schemes from pension advisors and investment bankers. The committee is advised to call the next boss, Lord Wolfson.
He is one of the few FTSE 100 executives who questioned the use of complex derivatives to maximize returns on “ultra-safe” fixed-rate investments. With the pension incomes of up to 10 million British pensioners at stake, the importance of the hearings cannot be underestimated.
Mike Ashley may have handed over the formal management of his Frasers group to son-in-law Michael Murray. But he can’t resist the deal. Debenhams’ experience of losing £180m on an equity investment has not dampened his enthusiasm.
His latest target is online retailer Asos, in which Frazier announced a nearly 5 percent share while share – about 78 percent below its peak – is in its lap. He also continues to show interest in legendary German fashion designer Hugo Boss, in which she owns an £840 million stake.
Together with its assets in N Brown, Australian retailer Mysale and many other companies, the Frasers Group is building a new retail conglomerate for the 21st century.
Credit: www.thisismoney.co.uk /