Liabilities had large exposures to rates but very small exposures to equities. Equity returns were prioritized because of a confluence of incentives, and those with executives' ears were ignorant of the risks we were illustrating. The Parallel to Bitcoin: This is the most pertinent parallel to where we are today with bitcoin - the ruthless intractability of institutional incentives. The UK LDI Disaster: LDI became very popular in the UK, but companies that offset liability increases with investment gains ultimately leveraged them via borrowing, causing the very Bank of England bailout that demonstrated the system's fragility. The agency problem that caused US corporate pensions to willfully ...
From: Epilogue