The pension fund crisis triggered by recent economic policies contributes to significant financial setbacks for major City institutions
Schroders, a historic name in the City of London, has seen its assets fall by a staggering £21 billion over just three months, highlighting the financial havoc caused by political instability and the crisis in UK pension funds. The company’s assets dropped from £773 billion to £752 billion between July and September, with the pension fund crisis, triggered by the controversial mini-budget, playing a major role in the losses.
The pension fund chaos was sparked when the government’s fiscal decisions led to a panic sell-off of British bonds. This prompted a dramatic plunge in the gilt market, which, in turn, forced the Bank of England to intervene to prevent further collapse. Schroders, known for its reputation as a stable and well-managed institution since its founding in 1804, was not immune to this financial storm. The company’s reliance on liability-driven investment (LDI) strategies, used by pension funds to balance assets and liabilities, left it vulnerable when the market crashed.
Despite the severe setback, Schroders chose not to provide further comment beyond its stock market announcement, and CEO Peter Harrison declined to speak to the media. Over the past year, the company’s shares have halved in value, now standing at 375p.
Schroders’ plight mirrors the broader struggles within the City, as other firms also face significant financial challenges. Jupiter Fund Management, for example, reported £600 million in client withdrawals last quarter. While this could be viewed as a positive sign of recovery within the business, Jupiter’s assets have also fallen by £11 billion this year, now standing at £49 billion. New CEO Matthew Beesley acknowledged the broader global economic pressures, but pointed to the UK government’s fiscal policies as a particular source of difficulty.
The ongoing turmoil, exacerbated by geopolitical instability and rising inflation, has seen Jupiter’s shares drop by 63% this year. The situation in the City remains tense, with institutions like Schroders and Jupiter feeling the full brunt of the economic turbulence.
