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FCA letter to the Chairs of the Industry Regulators and Economic Affairs Committees: Liability-driven investment funds


On 25 October 2022, the FCA published a letter addressed to the Chairs of the Industry and Regulators and Economic Affairs Committees regarding liability-driven investment funds (LDI funds), responding to a letter dated 14 October 2022 which had asked the FCA for more information on its work in this area.

The FCA letter acknowledges that on 23 September, and for a short period thereafter, the gilt market experienced a very rapid and significant repricing that was more extreme than any previous period of volatility, and wider than many market participants had deemed plausible in such a short timescale. The FCA notes that this episode required close work between the FCA , the Bank of England , and the Pensions Regulator to monitor and respond to the impact this volatility had on LDI funds. The letter states that this close working will continue, given ongoing volatility across a number of markets, and as the FCA looks at what lessons can be learned from this episode.

The letter goes on to outline the regulators, including itself, involved with this market and the recent steps it has taken in this area in response to developments under the following headings: (i) LDI funds and their managers; (ii) market stress; and (iii) protection of defined benefit scheme members.


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