Professional Pensions: 40% of DB Schemes ‘May Have Sponsor Credit Issues’

Nearly 40% of sponsors have significantly lower credit ratings than their pension schemes, which increases the likelihood of those funds being forced to rely on asset sales in the liability-driven investment (LDI) crisis, writes Stephanie Baxter at Professional Pensions, citing research from Credit Benchmark.

“Research by Credit Benchmark found that 63 out of 156 defined benefit (DB) pension┬ásponsors┬áhave credit ratings that are more than three notches weaker than their pension funds. It comes as some schemes have been forced to meet margin calls on their LDI positions as gilts rose sharply following the chancellor’s Mini Budget, causing the Bank of England (BoE) to intervene by buying long-dated gilts.

Professional Pensions, October 13, 2022.

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Credit Benchmark brings together internal credit risk views from over 40 leading global financial institutions. The contributions are anonymized, aggregated, and published in the form of consensus ratings and aggregate analytics to provide an independent, real-world perspective of credit risk. Risk and investment professionals at banks, insurance companies, asset managers and other financial firms use the data for insights into the unrated, monitoring and alerting within their portfolios, benchmarking, assessing and analyzing trends, and fulfilling regulatory requirements and capital.