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Liability Driven Investing

STRATEGY OVERVIEW

Objective

  • Customized approach designed around client-specific liability cash flows
  • Tailored approach consistent with different client needs and constraints, i.e., pension funds or insurance companies.
  • Provide daily risk, performance and attribution monitoring

Philosophy & Process

  • Assess different approaches to matching liabilities including cash flow matching, immunization or a combination of both (horizon matching)
  • Establish customized liability-matched benchmark
  • Implement and monitor
  • Active strategies provide opportunity to enhance yield and/ or increase returns within client-tailored risk profile.

Risk Management

  • Monitor and manage plan assets and liability ratio
  • Analyze investment implications based on actuarial information
  • Manage dynamic de-risking programs, such as triggers based on funding status for a pension plan.

Approaches to Liability Driven Investing

Cash Flow Matching
  • Customized portfolio to replicate monthly cash flows
Immunization
  • Portfolio constructed to closely match the liability or custom benchmark risk factors and minimize tracking error
Horizon Matching
  • Combines elements of immunized and cash flow matching approaches
  • Shorter-term liabilities are cash flow matched and longer-term liabilities are immunized

For more information on this product please contact us.

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