Pension Solutions and Liability-Driven Investing (LDI)

Focusing on the journey and the destination

The Pension Solutions and Liability-Driven Investing team addresses client needs through a diagnostic, collaborative approach that aids plans of all sizes and maturity stages. At the core of our capability are foundational equity, fixed-income, and asset allocation resources that skillfully deploy hedging and risk-taking expertise to achieve better outcomes. Our greatest strengths are our experience and flexibility in customizing solutions to deliver true partnership.

Recent insights:

Seizing the moment

LDI experts Andy Hunt and Jonathan Hobbs discuss the client journey to full-funded status.

Seizing The Moment

Andy Hunt, FIA, CFA: : LDI (liability-driven investing) is a solution. It is a partnership between us and a client to help figure out what they need to do, what they want to do, and what is possible. And putting those three together and journeying with that client over time is what LDI is all about. To my mind, it’s not a product. It’s a product plus a service. And that service is an ongoing and evolving one.

Jonathan Hobbs, CFA, FSA: Lately, when I’ve been talking to clients about their funded status, there’s this huge sigh of relief at the increase we’ve seen over the last couple of years. But there’s also some trepidation about what’s next and we want to help them achieve their goals, which are to get over that final hurdle of full funded status. So, we’ve been talking to them about things like increasing the level of precision in their hedging program, about diversification of some of the bonds they’re buying in their portfolios. And then also about how do you take the growth portfolio from where it has been with a higher risk allocation to something more risk-managed for the future.

Andy Hunt: Pensions plans have been on a journey for a number of years. The journey has evolved. So, what was important three, five, seven years ago is different. And what’s important today is getting the implementation right, seizing the moment, taking those steps that you’ve actually been wanting to do for many a year but have been maybe unable because the opportunity hasn’t been there. And then going forward, it is about effective implementation, taking strides to remember that a good LDI solution first and foremost has to be a good asset portfolio, as well as talking to and echoing the needs and the risks of your liability. And I think implementation of good asset portfolios is where the game is at right now.


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Pension solutions strategy

Full-service advice, guidance, and analysis. Our seasoned, service-minded team is committed to delivering forward-thinking pension capabilities. We can bring these to your plan and strategy, as suits your situation today and in the future.

Investment philosophy

  • Consider pension assets, liabilities, and sponsor business
  • Fully understand risks
  • Make a plan: Risk, return, time frame, responses
  • Implement wisely: Diversify risks, target alpha, be prepared to adapt
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Fixed income and LDI

Liability-driven investing (LDI) is dynamic and there are many stages of the journey. One size does not fit all for LDI, so best practice is continuous evolution. The team’s futureproofing approach is adaptive in recognizing when and how to evolve any given LDI strategy. We can be your trusted partner today and in the future.

Stage 1
Standard off-the-shelf long duration benchmark; actively managed; simple first step, easy move from aggregate bond benchmark to long government credit. Learn about the U.S. Long Government Credit Strategy.

Stage 3
Implementation diversification — credit; seek more reliable alpha through multiple managers and/or benchmark construction — for example, small issuer long credit. Learn about the Small Issuer Long Credit and U.S. Long Credit Fixed Income strategies.

Stage 5
Capital efficiency and customized rates exposure; offers portfolio efficiencies plus downside protection potential.

Stage 2
Separate interest rate hedge from credit hedge; manage both strategically and tactically; can target value-added opportunities as spreads change; more tunable risk management. Learn about the U.S. Corporate Plus and U.S. Intermediate strategies.

Stage 4
Implementation diversification — extended fixed-income assets; seek value-added opportunities from other relevant fixed-income sectors. Learn about the U.S. High Yield Bond Strategy.

Stage 6
Ties asset receipts to liability cash flows; helps reduce reinvestment risk and cost; captures illiquidity and diversification benefits.

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Return-seeking strategies

Our Systematic Edge - Multi-Asset Solutions team brings together the return-generating resources of the firm to deliver on client objectives. These encompass efficient return capture by exploiting market inefficiencies and information advantages in different parts of the capital markets. Each component has a part to play in an efficient and diversified return-generating portfolio.

Fundamental equity:
Our independent equity teams — fundamental active, quantitative, and factor based investing — have the freedom to think differently, be contrarian, search for alpha and build out proprietary risk management approaches. Each team conducts its own research and develops strategies in their areas of expertise. Learn More

Our Systematic Edge - Multi-Asset Solutions team brings breadth and depth of resources to serve you as you seek to grow, protect, and generate income from your assets. This includes investment approaches such as absolute return, total return, balanced funds, alternative risk premia, and risk hedging. Learn More

Systematic equity:
Our teams apply factor approaches across equity, fixed income, currencies, and commodities when selecting securities; building portfolios; and designing broad, outcome-oriented investment solutions. Learn More

High yield and bank loans:
Our Plus Fixed Income team is a bottom-up manager that invests across all sub-investment-grade credit-quality segments. Learn More

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Risk management and implementation

An effective investment strategy is more than a sum of its parts. We integrate all of the components of plan implementation in a coordinated manner. Our outcome focus prioritizes risk management and capital efficiency on our quest to successfully deliver on client goals. A long-standing track record of innovation helps client portfolios efficiently achieve what they’ve set out to.

Outsourced Chief Investment Officer (OCIO):
Since 1990; total plan management to achieve funding objectives

Glide path implementation:
Since 1994; daily monitoring of asset allocation and other triggers and rebalancing to strategic assets

Risk management overlays:
Since 2004; liability interest rate hedges, equity risk management via options and futures

Tactical asset implementation:
Since 1990; express views around strategic targets which has resulted in increased return and reduced risk

Equity option overlays:
Since 2004; downside protection and income generation

Dynamic risk management:
Since 2015; put replication and volatility management

Mapping the journey

Pension liabilities are about the long term, and so is our relationship with you. The insights we gain working closely with you enable us to create solutions targeted to your true needs and investment views. We work with you to build diversified, actively managed, opportunistic portfolio solutions with strong risk management.

Customize your investment design based on your plan’s liabilities and need for growth and re-risking

Engage with our clients over time providing consistent monitoring and detailed reporting

Update and evolve your risk signature over time to adjust your portfolio when appropriate

Define your plan’s risk signature with a comprehensive asset and liability analysis

Your team of experts

Our seasoned specialists are service minded and are truly experts in pension solutions investing. You can rely on us to provide sound investment practices and maintain vigilance through changes. We are agile in our responses and are a dedicated partner at every step of the journey.

Diversification does not ensure or guarantee better performance and cannot eliminate the risk of investment losses.