What UK mini-Budget crisis tells us about FPL
What we learned from Gameweek 9 and the importance of understanding risk
UK pension funds have been at the centre of a crisis over the last two weeks which forced the Bank of England to put together a £65 billion support package to stabilise markets. Unsurprisingly, this got me thinking about fantasy football.
Pensions and FPL? Really? OK, I know I’m asking a lot, but please bear with me – this is going somewhere, I promise.
First, a quick explainer of exactly what happened. UK pension funds are big investors in long-term UK government bonds, known as gilts - essentially IOUs from the Treasury. These gilts pay an interest rate, or yield, to those who buy them. Pension funds are big buyers of gilts, using the yields to pay people’s promised pensions.
Gilt pricing works in the same way as other areas of the economy. When more people buy gilts (i.e. demand goes up), the price rises and the yield drops. When people sell gilts, the price drops and the yield rises.
Following Kwasi Kwarteng’s ill-fated “mini-Budget” at the back end of last month (Kwarteng is in the photo above), investors were spooked and sold off UK government gilts, forcing the price down and the yield up. This would normally be good news for pension funds as, all else being equal, the estimated cost of paying people’s pensions, or liabilities, would fall.
However, lots of pension funds don’t like being exposed to this risk and so bought complex products designed to hedge it. That meant if gilt yields went down (and liabilities went up), they’d receive cash from the investment bank operating the hedge. Conversely, if gilt yields went up (and liabilities down), they’d have to pay money to the investment bank.
Because gilt yields rocketed by so much in the wake of the mini-Budget, the amount of cash demanded by investment banks running these hedges also went through the roof – and pension funds were being forced to sell off their investments to pay the piper.
The kicker was that because one of the main assets pension funds own is UK government gilts, this risked compounding earlier sell-offs and creating a death spiral in the price of gilts. The Bank of England’s dramatic intervention - essentially indicating its willingness to buy gilts to boost the price - has stabilised the situation, at least for now.
Both the government and pension funds involved were caught on the hop because they’d failed to properly appreciate and plan for the risks associated with gilt yields rising as fast as they did.
The lesson for FPL? Know your risks. Fantasy football is all about risk management, which means understanding both the potential downsides of any decision you take as well as the upsides.
Take Manchester City’s Erling Haaland (FWD, £12.1m) as an example. At the beginning of the season, there was a fair amount of uncertainty about exactly how quickly the Norwegian forward would make an impact given he was playing under a new manager, in a new system and in a new league.
Settling-in periods are common and there were reports Haaland would be eased into the action, so it wasn’t a given you would have him in your Gameweek 1 starting XI in FPL.
However, based on his record and the quality of City’s attack, there was always a chance he would go berserk from the get-go – and that is what we have seen. If you didn’t have him in your team in Gameweek 1, having a plan to get him in should he blow up would have limited the risk of you being cast adrift in your mini-league.
Similarly, while Mo Salah (MID, £12.8m) has been widely sold-off in recent weeks, you should still follow his and Liverpool’s form (not to mention the Egyptian’s price). There may come a time when both bring him back into contention.
And so, to the latest slate of fixtures and ‘What we learned…’, with a focus this week on players offering genuine differential value. Our thinking here is that with the emergence of Haaland as not just a must-have but also a must-captain asset, the importance of picking the right differential players has ratcheted up a notch.
We’ve drawn the line for a differential at 15% ownership - a random point that just “feels” right. Let us know if you agree or disagree.
Phil Foden (MID, £8.1m) – 11.4% ownership
Speaking of knowing your risks, City’s Foden is all-of-a-sudden the fifth top scoring player in FPL after his devastating hat-trick against Manchester United on Sunday.
The oft-discussed risk here is nothing to do with talent – Foden is one of the most naturally gifted attackers in the Premier League – but the other key ingredient to FPL success: opportunity. To put it bluntly, what happens if you ‘get Pepped’ and the England winger is left on the bench?
That is a risk but perhaps a lower risk than you might think. Foden has started every Premier League game this season and played over 70 minutes in seven of nine matches. His lowest number of minutes is 45 against Bournemouth in Gameweek 2 – and even then he bagged a goal, an assist and nine fantasy points.
It’s worth noting that Foden is outperforming his expected goals (xG) and expected assists (xA) at the moment, with his underlying stats pointing to a combined 0.55 goals and assists per 90 minutes versus the 1.25 per 90 minutes he has delivered. However, player quality needs to be accounted for here.
Next up are Southampton at home and then Liverpool away – statistically two of the league’s ropier defences. Even with a blank coming up in Gameweek 12, Foden offers serious FPL upside and excellent value-for-money.
Leandro Trossard (MID, £6.7m) – 8.8% ownership
From one hat-trick hero to another and a Fantasy Gameweek favourite – Leandro Trossard. We flagged the Belgian winger’s potential in our pre-season previews (you can read the article here) and after a more than solid first six games of the season (two goals, two assists and 32 points) he exploded into life with a spectacular hat-trick at Anfield on Saturday.
There is regression risk here which needs to be taken into account. Trossard has so far delivered 0.78 goals and 0.16 assists per 90 minutes this season, far higher than his xG of 0.39 per 90 minutes and his xA of 0.11 per 90 minutes, respectively.
But even with that risk, £6.7m feels like a low price for a player who, despite his recent exploits, is a guaranteed starter with bags of ability in a progressive attack.
Jarrod Bowen (MID, £8.1m) – 4.1 % ownership
After a painfully slow start to the 2022/23 campaign, Bowen looked back to his best in West Ham’s comfortable 2-0 win against hapless Wolves on Saturday.
As a reminder, Bowen bagged 12 goals and 17 assists in the 2021/22 campaign, delivering one of the great FPL seasons in the process.
He’s got a plum set of fixtures coming up to continue his rehabilitation, including Fulham at home, Southampton away and Liverpool away in the next three. Get Bowen in your team now – his price is only going one way from here…
Callum Wilson (FWD, £7.2m) – 1.2% ownership
Newcastle’s Wilson has struggled with injuries this season (and indeed throughout his career), but when he’s been fit, he’s been very good, scoring three goals in four outings and bagging 20 FPL points in the process.
Those returns are backed up by the underlying statistics, with Wilson recording an impressive xG of 0.84 per 90 minutes this season – better than Harry Kane and second only to Haaland.
Newcastle face moderate opposition in the coming weeks, including home fixtures against Brentford and Everton. And with Alexander Isak (FWD, £6.9m) likely injured, Wilson looks sure to be the focal point of the Newcastle attack for at least one more week.
Pervis Estupinan (DEF, £4.5m) – 0.5% ownership
This one is a little bit more of a swing based on the underlying data. But hear us out.
Unsurprisingly, Man City’s Kevin de Bruyne (MID, £12.2m) has the highest xA per 90 minutes of any Premier League player this season, at 0.54. More surprisingly, Brighton defender Estupinan currently stands second at 0.4.
Admittedly the sample size is relatively small (he’s only played 244 minutes), and xA as a statistic can be flawed as it doesn’t take into account the quality of the finisher. After all, Estupinan’s crosses are being delivered to Danny Welbeck rather than Erling Haaland…
But getting into advanced positions is positive for his FPL chances, as is the fact he’s started three of the last four games (including bagging one assist versus Fulham). Brighton’s defence has shipped a few goals recently but should remain a solid source of clean sheets even after the departure of Graham Potter to Chelsea.
Up next are Tottenham at home, Brentford away and Forest at home – a nice run which provides an opportunity for Estupinan to prove the underlying data right.
Thanks as always for reading (and in particular for putting up with pensions chat). Any questions, queries or comments, please get in touch.
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