Institutional investors

LDI benchmarking When does the basis risk of an LDI hedge begin to matter? September 2011 Martin Jaugietis, CFA Director, Head of Liability Driven Investment Solutions Michael Thomas, CFA Chief Investment Officer Americas Institutional James Gannon, FSA EA Director, Asset Allocation and Risk Measurement The calculation of U.S. corporate pension plan liabilities is typically based on the yields of high-quality corporate bonds. As plan sponsors ramp up their liability-driven investment (LDI) programs, at what point do the components of the liability-hedging portfolio begin to matter? This paper demonstrates that credit exposure (and, later, high-quality corporate bond exposure) becomes progressively more important as allocations to fixed income increase. Download Research For more information about our research, please contact David or Gerry:     West Coast David Rothenberg Managing Director 866-926-5934 East Coast Gerry Lillis Director 866-459-4128 Please remember that all investments carry some level of risk, including the potential loss of principal invested. They do not typically grow at an even rate of return and may experience negative growth. As with any type of portfolio structuring, attempting to reduce risk and increase return could, at certain times, unintentionally reduce returns. Date of first use: September 2011 USI-10935			Printer friendly version of this page