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Transitioning to LDI strategies Beliefs, behavior, strategy and tactics for transitioning into a liability-driven portfolio June 2011 Travis Bagley Head, Fixed Income Transitions Aran Murphy Product Strategist What are the transition management considerations when moving from an asset-focused, traditional portfolio strategy (e.g. 60% equities / 40% bonds) to a liability driven asset allocation? This paper provides perspective on the transition management aspects of liability-driven investing (LDI). It discusses first the context and motives for moving into a liability matched investment portfolio, and then describes two of the potential strategies for portfolio transitioning. It concludes with the tactical considerations of the transition for a plan sponsor. 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. Liability Driven Investment (LDI) strategies contain certain risks that prospective investors should evaluate and understand prior to making a decision to invest. These risks may include, but are not limited to; interest rate risk, counter party risk, liquidity risk and leverage risk. Interest rate risk is the possibility of a reduction in the value of a security, especially a bond or swap, resulting from a rise in interest rates. Counter party risk is the risk that either the principal or an unrecognized gain is not paid by the counter party of a security or swap. Liquidity risk is the risk that a security or swap cannot be purchased or sold at the time and amount desired. Leverage is deliberately used by the fund to create a highly interest rate sensitive portfolio. Leverage risk means that the portfolio will lose more in the event of rising interest rates than it would otherwise with a portfolio of physical bonds with similar characteristics. Date of first use: June 2011 USI-9942			Related Information Liability-driven investing Printer friendly version of this page