More than half (53 per cent) of defined benefit (DB) professional trustees believe they have the knowledge and skills needed to handle another liability-driven investment (LDI) crisis if it comes, research from Charles Stanley Fiduciary Management has found.

The 2024 survey of professional trustees, which polled 71 DB professional trustees, found that 63.38 per cent of professional trustees are confident in using LDI as a tool to manage risk.

Furthermore, 42 per cent of professional trustees had increased their investment in illiquid assets, a decline from last year’s results, when 48 per cent of trustees said that their appetite for illiquid investments increased since the LDI crisis.

“Interestingly, that [LDI crisis] has not put everyone off, a decent chuck of schemes are increasing their illiquid allocations, that could be because of longer time frames,” Charles Stanley Fiduciary Management portfolio manager, Barnaby Low, said.

He said it was “encouraging that people have worked through those issues, thought about what has gone wrong and now are happy to use illiquid assets again if that is what is right for their scheme.”

The survey also showed that the hedging ratio has increased, with over half (52.5 per cent) of professional trustees having increased their hedging ratios, compared to 29.4 per cent who decreased theirs.

In addition to this, 65 per cent agreed that the LDI crisis has made fiduciary management more attractive for many.

The survey also found that seven in 10 (70 per cent) of professional trustees said that they had changed their long-term funding target in the past 12 months.

Speaking about the findings at the Pensions Age Autumn Conference, Low said “Change is one of the words that best describes the industry at the moment.

“We have got a new funding code; we have got a new government, and we have a relatively new market regime in terms of higher interest rates.

“With that change, you’d expect trustees and companies to be reviewing and thinking about whether their long-term targets are still appropriate and what is now possible which wasn’t possible perhaps a couple of years ago."

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