Liability Driven Investing

The last decade has been a tumultuous one for pension plans of all stripes, whether corporate, Taft-Hartley, or public; frozen or ongoing; large or small. Many have turned to “liability driven investing”(LDI) as a way to “de-risk” their pension plans, i.e., hedge their pension plan liabilities, reduce funded status volatility, and better predict future contributions. Unlike traditional asset management, which is focused on risk and return relative to asset or market indices, LDI views assets as a means of achieving a plan sponsor’s goals relative to the plan’s unique liabilities.