Watson Wyatt Worldwide recommended that more than 90% of the U.S.-based defined benefit plan clients for which it provides asset-allocation advice include liability-driven investment strategies in their plans over the past year to better hedge pension liabilities, according to a news release from the consulting firm. U.S. pension plans are increasingly shifting to LDI strategies to reduce potential volatility spurred by shifts in accounting regulations and the newly enhanced funding requirements in the recently enacted Pension Protection Act of 2006.
"Higher funding targets, restrictions on smoothing and requirements for valuing pension assets and liabilities at a market basis are prompting companies to look for more predictable returns through liability-driven investing," said Mark Ruloff, director of asset allocation, in the release.
