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White Papers

Balancing Risk and Return for Custom LDI Strategies

As 2014 began, a combination of strong asset returns, favorable changes in interest rates, and voluntary pension contributions had significantly increased funded ratios relative to a few years ago. As a result, many plan sponsors have moved into a more advanced stage of a liability-driven investing (LDI) implementation, and have shifted more pension assets into custom liability-based bond mandates. These custom LDI mandates typically have a primary objective that is different from generating excess return relative to a traditional public benchmark. Instead, an LDI mandate will have two important goals: producing returns that outperform or keep pace with the liability (or
a liability proxy used for reporting purposes), and minimizing overall funded-status volatility along the way.

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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.