Collateral waterfalls for LDI

19 May 2023

Laura Catterick Commercial Director


Laura Catterick
Commercial Director

There’s no doubt that managing the spike in Liability Driven Investment (LDI) collateral calls last September was a challenge for all of us – whether trustees, asset managers, consultants, or platforms.  Like many in the industry, we’ve been talking to interested parties to understand how we can improve our proposition to meet the requirements of the LDI market for 2023 and beyond.

One initiative we’ve introduced at Mobius Life is automated collateral waterfalls, where our clients nominate in advance which funds will be used to meet future calls and in which order.

This means we can automatically use the agreed fund to meet calls without the delay of awaiting instructions – and if the agreed fund can’t meet the call, we have instructions about which subsequent funds to sell.

Automated collateral waterfalls will provide added comfort that calls can be met on time and in full and will reduce the need for advisors and trustees to be involved in the process.

The events of last September, re-emphasised the benefits to our clients of being on the Mobius Life platform.  Yes, we experienced long working days with soaring trading volumes, but we were able to respond to our clients’ needs.

At the same time as managing collateral calls, we efficiently managed all other aspects of our clients’ investment administration, including transitioning assets, switching funds, rebalancing portfolios, monitoring trigger points and manufacturing bespoke funds – all the while taking execution risk away for schemes of all sizes.

If the volatility in rates and LDI markets re-emerges in 2023 or beyond, we’re likely to see further spikes in collateral activity.  Navigating these changes can be a challenge for trustees and consultants – but those with assets held on the Mobius Life platform can be confident we will continue to administer changes in asset allocation and collateral management on their behalf.

Whatever LDI strategy schemes choose to follow, the timely and accurate reallocation of scheme assets is essential; whether is it selling liquid assets to meet collateral calls or unwinding existing LDI investments.  This is where the benefits of the Mobius Life platform really kick in; consultants can focus on advising their clients on the right strategy, rather than worrying about investment administration and the execution risk involved.

For schemes managed on the platform, consultants or trustees simply need to send us the instruction to execute their required changes. Our in-house specialist implementation team will do the rest, seamlessly, safely, and timely.

Helping our clients manage LDI strategies and facilitating waterfall collateral management are further benefits of the Mobius Life platform and set us apart from other institutional pension platforms.


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