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Updated: Mar 28, 2023

Another tough month for both fixed income and equities, with the prospects of a more meaningful collapse in UK Pensions driving the headline news. A crisis was adverted by swift action from the Bank of England. Her Majesty, Queen Elizabeth II, passed away, leading to a period of national mourning in the UK.

Market Performance (GBP)

MSCI World Index - -5.78%

S&P 500 - -5.36%

FTSE 100 - -5.16%


BOE Temporary QE

The Bank of England (BoE) was forced to temporarily reintroduce QE in response to Lizz Truss's mini-budget which caused a spike in UK 10 year debt from 3.8% to 4.5% in one day. In the same month, the BoE hiked 0.5% and the FED hiked a further 0.75%.


Lizz Truss was announced as the new PM of the UK on September 5th and quickly set about dismantling economic orthodoxy - first with an energy price cap for everyone and then with a mini-budget where taxes were slashed, notably for the richest. This was un-funded by the OBR, and the gilt market melted as a result. The Pound fell, and the UK

entered political turmoil.

Liability Driven Investments (LDI)

The sharp rise in the gilt market meant that a number of pension funds were forced to sell assets quickly to re-balance their holdings. Liability Driven Investments (LDI) rely on leverage and stable interest costs to operate effectively. With gilts moving up sharply, pension funds were forced sellers to meet their model requirements.

Queen Elizabeth II

Queen Elizabeth II passed away on September 8th, delaying the BoE's MPC meeting, and leading to a period of national mourning. King Charles III's official coronation will be held in 2023 but Charles is now the King of England. Her majesty reigned for 70 years.

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