The journey away from LIBOR
It is expected that the London Interbank Offered Rate, LIBOR, will cease to be published at the end of 2021. LIBOR is used extensively across the financial services industry including abrdn. We are working ahead of this timeline to efficiently control any impact on our clients and business.
We have established an extensive programme to manage the expected change across three key areas:
- LIBOR’s use as a performance benchmark
- its use as a reference rate in derivatives
- its use in financial and contractual documentation
This change is not anticipated to have a significant impact on how we manages our clients’ portfolios. In some instances, there may be an impact on the investments held within a portfolio, although the degree of impact varies from holding to holding. Examples of holdings that may be impacted by the termination of LIBOR include:
- a Collective Investment Fund where the Fund utilises derivative contracts in seeking to achieve its overall objectives
- a bond (fixed income) holding where regular interest payments are linked to LIBOR
- Cash where the rate of interest paid is linked to LIBOR
In the majority of cases, the main change for clients will be in the calculation of the individual performance benchmark for their discretionary portfolio.
We will write to clients in advance of the 2021 scheduled date to confirm any key changes to their portfolio or the portfolio’s benchmark as a result of the discontinuation of LIBOR.
In the meantime, if clients have any questions about the impact of LIBOR’s discontinuation on their investment portfolio(s), they can contact their usual abrdn representative.
For more information on LIBOR please see the link below:https://www.standardlifeaberdeen.com/home/the-journey-away-from-libor