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LIABILITY-DRIVEN INVESTMENT (LDI) CAPABILITIES

The roll-out of the Pension Protection Act of 2006 and expected consequences for FASB accounting regulations are motivating pension plan sponsors to consider broad changes to their investment policies and asset allocation. Fiduciaries, anticipating the impact of pension expenses on financial statements, are exploring new ways to reduce the volatility of assets with respect to liabilities, while still positioning portfolios to maximize returns.

Striving to achieve this objective without sacrificing attractive investment returns often entails the use of fixed income overlay strategies. These are designed to match the interest rate sensitivity of assets with those of liabilities, thereby reducing the volatility of the funded status. Such an overlay strategy can be implemented through a combination of fixed income physical assets and interest rate derivatives. When coupled with an alpha engine to create a long-duration portable alpha program, investors retain the potential for generating returns within a liability-driven investment framework.

Strategic Investment Group, with its heritage of managing institutional pension assets and capabilities for managing asset duration against liabilities, can be a value-added partner to guide the implementation of such strategies. We bring two compelling options to investors: Comprehensive LDI Plan Management and Long-Duration Portable Alpha.

To learn more about Strategic’s capabilities, please click here.

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