Liability-driven investing advice
Helping you manage the complex picture of your pension plan.
We know what's at stake
A misalignment with the assets and liabilities of your pension plan could have severe consequences for both the plan sponsor and the beneficiaries. Real people are depending on the future payouts in order to enjoy their retirement years. As a fiduciary, it is your responsibility to manage your organization's pension fund in the context of the promises made to your employees and pensioners. We will work alongside your team to develop a tailored liability-driven investment (LDI) strategy designed to fit your organization.
When the Pension Protection Act of 2006 changed the way plan sponsors looked at their pensions, we took action by developing a new approach we call liability-responsive asset allocation (LRAA).
We will provide sound guidance to develop an efficient and effective LDI strategy to meet your organization’s long-term needs. Your LDI strategy may include:
- Interest rate hedging
- Inflation rate hedging
- Fixed income strategies
- Implementing swaps and other derivatives
Designed to reflect the behavior of pension liabilities, the Barclays LDI Index Series measures U.S. liability-driven investing (LDI) portfolios and help you better- manage pension funding requirements. Further, it more closely matches the duration and credit quality of a plan's obligations than other commonly used fixed income indexes or yield curves and can be used to evaluate the skill of managers in their ability to reduce the tracking error of the fixed income portfolio return against the pension's liabilities return.
Be ready when your funding ratio rises
Liability-driven investing requires daily, real-time, pro-active management. "Are you ready when your funding ratio rises?" asks Martin Jaugietis.
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 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.
The Bloomberg Barclays LDI Index Series calculated by Barclays Risk Analytics and Index Solutions Ltd. (“Barclays”) provides the liability driven investment methodology implemented in the selection criteria of the Bloomberg Barclays LDI Index Series without regard to any person. All rights in the Bloomberg Barclays LDI Index Series vest in Barclays and Russell Investments Group LLC (“Russell Investments”). Any funds, products or other securities or investment vehicles using or based on the Bloomberg Barclays LDI Index Series are not sponsored, endorsed or promoted by Barclays or any of its affiliates, and neither Barclays nor any of its affiliates acquires any relationship with any investor upon making any investment in any such product, fund or security. NEITHER BARCLAYS NOR RUSSELL INVESTMENTS NOR THEIR AFFILIATES NOR THEIR LICENSORS SHALL BE LIABLE (INCLUDING IN NEGLIGENCE) FOR ANY LOSS ARISING OUT OF USE OF OR RELIANCE ON THE BLOOMBERG BARCLAYS LDI INDEX SERIES BY ANY PERSON, NOR SHALL EITHER PARTY BE LIABLE IN RESPECT OF THE ACCURACY OR COMPLETENESS OF THE BLOOMBERG BARCLAYS LDI INDEX SERIES.
Indexes are unmanaged and cannot be invested in directly.