File Outline Insight

Doing LDI Well in 2023 and Beyond

This piece discusses LDI best practices. Improvements sought include more efficient hedges, improved cash flow management, more diversified risk, awareness of climate transition, more yield, and higher expected alpha.

Geometric grey shapes.

Key takeaways

  • Best practices in LDI are ever-evolving. This paper reflects our latest thinking on design and implementation.
  • A good LDI portfolio blends the positive characteristics of being a good hedge to liabilities with good risk diversification, yield, excess return, and income.
  • We believe hedge ratios are superior to the customary asset allocation approach because they are more deliberate and controllable.
  • Portfolio construction should target multiple yield sources, efficient diversification, and diversified excess returns, all at a suitable level of complexity for the investor.
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