The simple and primary message of liability-driven investing (LDI) is that it strives to match the return on pension plan assets with those of the plan’s liabilities.
Western Asset economist Michael Bazdarich explains how the risks facing defined benefit pension plans that use liability driven investing (LDI) are fundamentally different from those for a standard investor.
Portfolio Manager Amit Chopra explains how DB plans can reduce funded status volatility and enhance yield by simply owning convexity.
This paper presents a risk-factor approach to Liability Driven Investing (LDI) and analyzes the sensitivities of both pension liabilities and assets to these factors.
Managing investment risk may seem to be the most difficult when markets move rapidly and volatility is high. In practice, however, it is often low volatility environments that are more challenging to navigate.
At a pension plan conference not long ago, a plan manager asked, "Why can't I just forget about de-risking and behave like a long-run investor: maximizing expected total return?
A Defined-Benefit (DB) pension plan’s obligations to its beneficiaries are estimated by applying assumed mortality rates to the plan's census of beneficiaries, both active and retired.
A pension plan’s assets need to achieve a total return that matches or exceeds that of its liabilities. Merely achieving asset returns that fluctuate in line with liability returns...