Where there is a large loss, you will find a lawyer – and I say this as one myself. (I qualified as a solicitor in 1983, before going into journalism.)

Hence there is the inevitable talk about litigation lawyers looking into the liability-driven investing (LDI) saga, triggered by the disastrous mini-Budget. Of course, you do need to pinpoint the so-called losses and I suspect more is to come out about this.

So far, the BT pension fund has said it has ‘lost’ £11bn – a figure so large it surely merits much more explanation and context. Newspapers have reported that a solutions division of Schroders that included LDI had quickly ‘lost’ £20bn in assets – Schroders itself hasn’t commented, so it is hard to know what this means.

What can we say?

Who is to blame?

Firstly, we are not talking about institutions versus private investors here. The LDI arrangements had institutions on both sides. The pension funds would – certainly should – have had their own advisers. This already makes litigation harder.

Secondly, there is nothing intrinsically wrong with pension funds seeking to match their assets with liabilities, which is what LDI seeks to do. Regulators were fully aware of it, so there was no mis-selling at the concept level.

Questions can be legitimately asked about whether the LDI schemes were properly explained, including any risks, particularly around leverage and the use of derivatives. If you forced me into a view, I would say most likely they were. This is different from saying pension funds and, in particular, their trustees fully understood everything.

But they would have had advisers holding their hands and representing them. Also, I would imagine the legal documentation will be watertight in protecting the LDI solution providers and the coterie of others around this issue, such as consultants and investment banks.

The important caveat here is that the risk that caused all the problems – the catastrophic and unprecedented collapse in gilt prices – was not foreseen. And LDI pioneers such as Insight Investment say the fall was so far beyond any expectation that it could not have been reasonably predicted. To put it another way, it was beyond the scope of any sensible risk-management system.

Again, I think lawyers will be in difficulty because the test of reasonableness (which applies in negligence cases, for example) would consider the extreme and unprecedented nature of the event. Should it reasonably have been foreseen, explained to the customer, and provided for? As a pure outsider, I would say no.

What was lost?

It is worth looking at the issue of the ‘losses’ made. Losses are only incurred when realised. Therefore, in this situation where pension funds had to fire-sale assets at knockdown prices to meet margin calls, they lost money. They may also have closed out hedges and lost money. It was mayhem for many pension funds.

I suspect everything was done in haste and with some advice. It may be that in the quality of that advice, the lawyers find some fertile ground. Putting my journalist hat on, there must be some good stories there. I suspect more is going to come out here. For the lawyers, the devil will be in the detail of individual cases.

At the very least, relationships will be reviewed, notably with banks who refused when asked for lines of credit by their pension fund clients.

Other ‘losses’ may only reference one side of the story – hence my liberal use of inverted commas. Take the BT pension scheme announcement of an £11bn ‘loss’. It looks like its funding liability went down by an equivalent sum. Arguably the LDI system on this fund did what it said it would, and there aren’t losses overall in terms of what the pension fund is seeking to achieve. You must view pension funds in terms of assets and liabilities and not just asset management. You need to establish a loss if you want to sue.

At the end of the day, this was a liquidity crisis, not a solvency crisis, brought on by a grossly negligent act of public policy – if anyone should be sued, it is the government. Now that would be an interesting (if tough) case to bring!