Pension Crisis Explained

Understand in 30 minutes what happened during the pension fund crisis, the role of LDIs, and the feedback loop on gilts.

About the course

On the 23rd of September 2022, the price of Gilts (UK Government Bonds) started to drop quickly. At the same time, there was intense pressure on the British Pound. We heard some explanations around pension funds, asset managers or liability driven investments. So what did really happen?

Join our expert, Huy Nguyen Trieu, Co-Founder of CFTE, and Former MD at Citi and Head of Pension Fund Structuring. Learn about what happened during the Pension Crisis and why there is this vicious circle in the markets at the moment. You will also explore the six key concepts of fixed income, the dynamics of pension industry, and intervention of the Bank of England.

Difficulty: Foundations
Duration: 30mins

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With this online course, you will:



Fund Management

Financial Market Analysis



The expert you’ll be learning from

Huy Nguyen Trieu

Co-Founder of CFTE

Huy Nguyen Trieu is the Co-Founder of CFTE. He is also the CEO of The Disruptive Group, a business builder and advisory firm in innovation and finance, and Venture Partner at Mundi Ventures, an early-stage VC fund in Fintech and Insurtech. He believes that in a world led by technology, we shouldn’t forget the importance of people, which is why he co-founded CFTE to help people improve their skills and find opportunities. Prior to setting up CFTE, Huy was a Managing Director at Citi, and previously at Royal Bank of Scotland and Société Générale. Before banking, he was the CEO of Ukibi, a VC-funded startup in the US. He is a frequent keynote speaker in Europe and Asia, likes to teach and share with students and entrepreneurs, and is regularly quoted in articles on innovation and finance. He writes the blog Disruptive Finance, is an Entrepreneurship Expert at Oxford Said Entrepreneurship Centre and a Fintech Fellow at the Centre for Global Finance and Technology at Imperial College. He was also a member of ESMA’s Consultative Working Group for financial innovation and a founding member of the Asian SuperCharger, one of the largest Fintech accelerators in Asia. Huy is a graduate from MIT (US), École Polytechnique (France) and Ecole des Ponts et Chaussees (France).

Course Content

The co-founder of CFTE, Huy Nguyen Trieu, is an entrepreneur and former banker with extensive experience in the field. The course aims to explain the current state of the markets and the factors contributing to the “vicious circle” currently being experienced.
Chapter 2 of the course focuses on key concepts related to fixed income, which is a financial asset class that involves the lending of money. The chapter covers six key concepts including government bonds, which are issued by governments to finance their activities, and linked to interest rates; interest rate swaps, which are exchanges of cash flow; and the link between central banks and inflation, as well as the transmission mechanism by which central banks control inflation through the manipulation of interest rates. The chapter also discusses the impact of low and high inflationary environments on the economy and the role of the yield curve in predicting future economic activity. Finally, the chapter covers the concept of duration, which is a measure of the sensitivity of the price of a bond to changes in interest rates, and the role of credit risk in the fixed income market.
Chapter 3 of the course focuses on the pension industry, including the structure and investment strategy of pension funds. The chapter covers three types of pension funds: defined benefit pension funds, which guarantee a certain amount of money to retirees; defined contribution pension funds, in which individuals invest money and receive the returns upon retirement; and state pensions, which are paid directly by the government. Our expert also discusses the concept of hedging pension funds and the challenges of managing defined benefit pension funds, which require the forecasting of cash flow payments to retirees over a long period of time. The chapter introduces the concept of liability driven investments, in which pension fund managers seek to match the liability cash flows of their defined benefit pension funds with investments in assets such as bonds and equities. It also covers the importance of risk management in the pension industry and the role of the yield curve in predicting future economic activity.
In this chapter, our expert discusses the pension crisis that occurred in September 2022. The crisis was triggered by a mini budget announcement by the UK government, which resulted in a significant drop in the price of UK yields and a corresponding rise in interest rates. The crisis was also characterised by a fall in the value of the pound sterling and increased market volatility. The chapter discusses the transmission mechanism by which the crisis spread, including the role of fixed income investors and their tendency to sell assets with perceived increased risk. It also covers the concept of collateral management in the financial markets and how it can contribute to the creation of a vicious circle of selling and further market declines, as well as, the impact of the pension crisis on defined benefit pension funds and the potential implications for future market stability.
To conclude, the pension industry is a major player in the fixed income market, with three types of pension funds – defined benefit, defined contribution, and state pensions – each offering different investment strategies and risk profiles. The pension crisis of September 2022 highlighted the complex interplay of factors that can impact the financial markets, including government policies, investor sentiment, and collateral management practices. The crisis had significant implications for defined benefit pension funds and demonstrated the importance of risk management in the pension industry.

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