UK clearing house LCH has expanded its buy-side repo clearing model in a move that can make the liability hedging-supporting tool available to a wider range of pension schemes.
LCH is now able to accept regulated investment funds as sponsored members of RepoClear, it announced last week. Major UK fixed income asset manager Insight Investment has added its QIAIF fund range to the platform.
Repo is the key instrument used by pension schemes to leverage their Gilt holdings to boost liability hedging levels.
Cleared repo is an alternative to bilateral repo, removing the risk of transacting directly with banks and bringing new sources of liquidity, said Jos Vermeulen, head of solution design at Insight Investment.
Pension schemes investing through Insight’s QIAIF fund range now benefit from the same access to liquidity that the asset manager’s pension fund clients have had since 2017, when Insight became the first investment manager to transact cleared repo on behalf of a UK defined benefit pension scheme.
This was also using LCH’s RepoClear platform.
“This latest development takes those steps further,” Vermeulen told IPE. “It’s making cleared repo available to pension schemes of all shapes and sizes.
“If you have a pooled fund that can clear repo, it opens up cleared repo to a much broader segment of the market rather than just the large pension schemes.”
Bruce Kellaway, global head of securities and collateral at LCH, said the expansion of RepoClear’s ‘Sponsored Clearing’ model was a significant development for the UK fixed income market.
“We are delighted to further extend the benefits of clearing to a greater portion of the buy side, enabling market participants to access repo capacity, maximise pricing and balance sheet efficiencies and ultimately optimise their risk management,” he said.
By adding its QIAIF range to the LCH sponsored clearing platform, Insight has paved the way for other asset managers to follow suit, it said. IPE has asked LCH about take-up beyond Insight.
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