Communication from the CSSF on Liability Driven Investment Funds

The recent volatility in yields associated with UK Gilts identified a number of vulnerabilities in Liability Driven Investment Funds (“LDI Funds”) across Europe, giving rise to a concerning cycle of collateral calls and forced sales.

In this context, the CSSF engaged proactively with the alternative investment fund managers managing LDI Funds denominated in GBP in order to improve the resilience of these funds.

Following a series of interactions over the past number of weeks between the Central Bank of Ireland (CBI – Ireland), the Commission de Surveillance du Secteur Financier (CSSF – Luxembourg) and the European Securities and Markets Authority (ESMA) in relation to LDI Funds, the CSSF issued today a letter on measures to be taken in relation to the management of these funds.

A copy of the letter can be accessed on the CSSF’s website: Letter to managers of Liability Driven Investments Funds denominated in GBP.