LDI: Portable Alpha’s First Cousin
Mar 27th, 2007 | Filed under: Liability Driven InvestingOn the family tree of modern investment management “LDI” and “Portable Alpha” are first cousins. Unfortunately, familial affection doesn’t necessarily go both ways. Portable Alpha is beginning to play a critical role in LDI strategies. But LDI isn’t really a prerequisite for portable alpha. As a result, LDI is a topic that is often ignored by the financial media, or worse yet, obfuscated with actuarial mumbo jumbo.
On Monday, Aon Consulting released its latest study of UK pensions and its findings match those of a similar study conducted by Greenwich Associates (covered last month). According to the Aon study, British pension schemes turned toward alpha-generating alternative investments such as real estate, hedge funds and global tactical allocation in 2006. (ed: The British term “scheme” always gets a chuckle in the US where it takes on more nefarious meaning - one that may ironically be more appropriate for pensions that actually have no way in hell of keeping their promises to growing legions of retirees).
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