JPMorgan chief executive Jamie Dimon downplayed the impact of the crisis in UK pension fund liability-driven investment (LDI) hedging during the bank’s quarterly earnings call on October 14, without dismissing the risk of further risk management accidents entirely.
“The LDI thing was a bump in the road,” Dimon said, before admitting: “I was surprised to see how much leverage there was in some of those pension plans.”
Dimon highlighted the opportunity for JPMorgan’s traders from a spike in spreads on collateralized loan obligation (CLO) deals that was exacerbated by the selling of assets by UK pension funds as they scrambled to raise cash to cover collateral calls on hedges.
“I want our people, when they [CLOs] gapped out like 300 or 400 basis points, I want them to be willing to buy,” he said.
Bankers further down the food chain who deal directly with funds are also keen to look for the bright side...
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