UK Billionaire, Paul Marshall warns that as one of the largest hedge funds in the world, the UK pension fund crisis is only just beginning, while central banks around the world are raising interest rates and ending quantitative easing.
Paul Marshall, co-founder of the $62 billion investment firm Marshall Wace, said central banks had created the perfect environment for “malinvestment” by artificially keeping interest rates low for decades. years.
“The UK LDI industry is the first casualty of the end of the era of money for nothing – the first dead fish to come to the surface as central bank interest rate hikes act as a dynamite fishing in global asset markets.”Marshall said in a letter sent to clients this month.
Liability-driven investing is a form of financial engineering that incorporates derivatives and allows defined benefit plans to increase leverage and returns. The Bank of England was forced to step in to stabilize markets after rising gilt yields triggered margin calls for funds processed too quickly.
Bank of England Withdraws Tax Cuts
Central banks reversed years of quantitative easing to curb rising inflation, triggering volatility and disrupting stock, bond and currency markets. The UK government, under a new prime minister, has now withdrawn tax cuts announced last month, triggering a sell-off in gilts and exposing weakness in the LDI structure.
Next could be the European government bond market, Marshall said. The billionaire also noted that given the fragility of the financial system, central banks may take a pause in monetary tightening.
“The painful path will have casualties and it will be interesting to see how central banks respond when those casualties come to the surface,” Marshall wrote. “Time will tell. But for now, we think the best opportunities remain on the short side.”he said, referring to a strategy that makes money from falling prices.
UK Government Introduces Bill to Digitize Trade Documents
Lawmakers in the UK House of Lords have introduced legislation aimed at eliminating the need for paper commercial documents and increasing opportunities for using blockchain technology to track records.
In an announcement, MP Michelle Donelan and the UK Department for Digital, Culture, Media and Sport said the Electronic Trade Documents Bill had been tabled in Parliament. The legislation proposes to eliminate “unnecessary paperwork and bureaucracy” by legalizing digital documents for commerce.
According to Donelan and the Digital Department, the bill will reduce document-related carbon emissions by at least 10% and cut processing times – around 28.5 billion paper trade documents are processed every day in the UK. If approved, the legislation would allow companies to provide electronic versions of documents, including promissory notes, warehouse receipts, cargo insurance certificates and ship’s bills of lading.