Sage Advice Asset Liability Quarterly Monitor 4Q2006

ALM is out, LDI is in. ALM (Asset/Liability Management) spent almost a full year as the most powerful acronym in pension plan management. Although not a new concept, ALM became the new pension plan panacea. But, just like ‘80s music, too much of a good thing eventually becomes cliché. So, enter a new acronym, LDI (Liability Driven Investment), which is technically similar to ALM, but implies the use of derivatives. No matter which acronym is in vogue, any attention brought to investment strategies which use a pension’s liability schedule as a benchmark is a step in the right direction.