Poll reveals explosive growth in LDI
Sep 1st, 2008 | Filed under: Liability Driven Investing, Today's Post
While liability-driven investing (LDI) has achieved some measure of celebrity over the past year, the concept still has a reputation for being of interest only to egg-heads and actuaries (apologies to egg-heads…okay, and actuaries).
About a month ago, consultancy Mercer wrote:
“It seems like only yesterday that Liability Driven Investing (LDI) was an interesting academic idea with few “real world” proponents among pension plan sponsors. Now, LDI regularly makes the front page of pension industry publications and is widely accepted as a practical and effective risk management framework. Plan sponsors implementing LDI strategies were “mavericks” only a few years ago; now they are “cutting edge.” For such a new area, LDI seems to have more than its fair share of experts. And there is a surprising diversity of opinions on what it is and what best practices are.”
The pace of change seems to be accelerating. Poll results released last Friday by SEI Global Institutional Solutions show that the simple, traditional definition of the concept, “matching the duration of assets to the duration of liabilities” is giving way to a more holistic view that LDI is ”a portfolio designed to be risk managed with respect to liabilities.”
Although this sounds like the same definition delivered by a marketing person instead of an actuary, SEI says this “suggests a stronger understanding around the broader implementation of LDI”. Curious about whether LDI was having a break-out year, we requested a copy of the full report. Here’s some of what we learned…



