Insight

How Steep Is Your LDI Portfolio?

The importance of the U.S. Treasury yield curve in valuing a pension pan’s liabilities is widely known. Andrew Hunt and Jonathan Hobbs explain why it’s important to consider both its curvature and its overall yield.

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Authors

10/7/2025

6 min read

Topic

Retirement

Key takeaways

  • It’s well known that the U.S. Treasury yield curve is important for valuing pension plan liabilities. We believe it’s also important to consider the Treasury’s curve as well as its overall yield.
  • Most U.S. pension plans hedge a “slice” of liabilities, generally seeking to hedge exposure across the curve—in effect, betting on a higher yield curve and steeper curve. However, this isn’t the only approach available.
  • We explain why best practice in our view is to separate the decision about overall duration from the potential shape of the yield curve. The tools could be built into a custom mandate with an LDI manager.

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