US public pension systems have reported higher allocations to infrastructure debt within LDI investing portfolios. Yield premiums on these assets, averaging 150bps over comparable Treasuries, provide an appealing liability match with lower correlation to equity markets. GoFundMe made for family after man killed trying to move power lines in Livingston Parish As gilt yields rose and their prices fell in September 2022, the value of LDI portfolios also fell and their levels of leverage increased. This resulted in increased margin calls from their counterparties (banks). LDI portfolios needed to sell gilts quickly to raise cash to meet the resulting liquidity demands, leading to a `feedback loop' as the value of gilts fell further. The scale of selling forced the Bank of England (BoE) to intervene by purchasing gilts in order to restore market functioning. LDI investing allocations shifted slightly toward mortgage-backed securities as prepayment speeds stabilize. This asset class offers predictable cash flows that align with liability maturity ladders, enhancing portfolio efficiency.
