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White Papers

LDI Implementation—Managing Surplus Volatility by Reducing the Drawdown Risk of Growth Assets

Since the wake of the financial crisis of 2008/2009, the funded statuses of public and private defined benefit plans continue to struggle. With limited capacity to absorb further capital losses, plan providers are seeking innovative solutions that manage draw-down risk and improve the health of their plans. QMA's US Market Participation Strategy—with its asymmetrical return profile and low correlation to other growth assets—provides an effective solution for addressing draw-down risk concerns and minimizing surplus volatility (while still seeking long term returns). By incorporating MPS in their growth assets bucket, plan sponsors have the potential to optimize the trade-off between improving funded status during normal markets and minimizing surplus volatility during equity bear markets.

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All white papers posted were created by the listed authors who are solely responsible for the research, finding and all materials contained therein. Pensions & Investments has not verified or edited the materials (other than for length and style) and does not necessarily agree or disagree with the analysis and positions expressed by the authors. Reference to any company, product or service does not imply recommendation or sponsorship by Pensions & Investments.

For more information on submitting a white paper, please contact Richard Scanlon at rscanlon@pionline.com or 212-210-0157.