Europe's pension fund managers embrace LDI quite generally, and many embrace the "dynamic" version of that strategy. But four scholars at EDHEC find it curious they don't do so for the right reason -- they don't seem to see LDI as the risk-management imperative it is.
Liability Driven Investing
Longevity hedging transactions are growing at an exponential rate in the UK. We focus on one case study in such transactions that might encourage (cautious) optimism about the tractability of demographics.
For pension managers these days, decision making is about managing a glide path that doesn't become a fiery crash. In appealing to such clients, consultants shouldn't think of themselves as sales people selling particular products in separate boxes.
In east Asia, savings rates have long been high and constant, and cannot plausibly be expected to get much higher. Indeed, they may in certain respects be too high. Thus, progress in addressing the pension/demographic crunch has to come on the asset management side.
Just like the rest of us, those who run pension funds put their pants on in the morning one leg at a time. And just like the rest of us, after balking at alternatives post-2008, a growing number are gaining more confidence in them as a way to fulfill their mandates.
Freedom 66 for pensioners could easily mean Freedom 45 or even Freedom 35 for hedge fund managers, thanks to their recent contributions towards helping to partially offset liability issues, according to a report by TheCityUK.
Pension funds look for opportunities to score points while they wait (and hope) for liabilities to chokeNov 14th, 2010 | Filed under: Commodities, Liability Driven Investing, Today's Post
A survey of pension funds and endowments by Deutsche Bank indicates that investors see themselves as having two options to dig themselves out of their current hole: aim for higher returns by dumping equities overboard, or waiting around for interest rates to take care of their liabilities.
For pensions it's quickly gone from 8%-plus assumed returns to fighting just to keep the assets and liabilities in sync.
Russell Investments says LDI has been moving slowly from academic journals to the mainstream. But 2009 will the the year when attitudes really change.
SEI released a poll of pension plans last week that reveals what is probably the biggest story in institutional investing last year - and it's not hedge funds (per se).
The release of a new survey on liability-driven investing prompted us to ask ourselves what the strategy was really all about.
There seems to be a growing debate about the best way for pensions to match their assets and liabilities. And at least one manager is even suggesting there may be a conflict of interest brewing.
While many people love a good sausage with their eggs, no one wants to see how they're made. Apparently, ING has now applied the same logic to liablity driven investing (LDI).
Liability-driven investing traditionally involves measuring pension fund returns against a benchmark made up of the plan's own liabilities. But what if you could swap those liabilities for fixed ones?
On the family tree of modern investment management â€œLDIâ€ and â€œPortable Alphaâ€ are first cousins. Unfortunately, familial affection doesnâ€™t necessarily go both ways. But LDI is doing fine, thanks.
By: Daniel Brooksbank, IPE.com Published: November 20, 2006 Clients of Portable Alpha’s cousin Liability-Driven Investing (LDI), take note: According to UK law firm Reynolds Porter Chamberlain, trustees who embrace LDI can leave themselves exposed to negligence claims for being too conservative. According to IPE.com: “Reynolds’ partner Simon Goldring said the strategy could be storing up problems […]