25 min read

Climbing a Ladder to Successful Outcomes

Ladders leaning up against a wall

Despite their use in other areas of investment management, including their value as both components and stand-alone investments, we feel bond ladders are generally underutilized in the DC market. In a retirement income context, this underutilization is particularly disadvantageous. Pure ladders are the natural low-risk retirement income solutions, which alone should qualify them for consideration both as components in larger retirement income solutions and as credible stand-alone alternatives. For example, our flagship Retirement Income Strategy considers pure bond ladders in three ways: 

  1. The Strategy converts to a pure bond ladder in its last five years, where the greater degree of income certainty outweighs to miss opportunity of market growth. 
  2. The Strategy also recognizes that a pure bond ladder is the natural low risk alterative to our solution. 
  3. The Strategy uses a pure bond ladder as the basis for building the de-risking component of our solution. 

Within the fixed income component of our solution, we rely on an evergreen bond ladder, seeking the stability of its cashflow characteristics

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Rethinking Overlay Manager Diversification

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At LGIM America, we believe overlay manager diversification is likely inefficient and creates uncompensated risks. Using multiple overlay managers can result in increased costs, collateral inefficiency and higher governance burdens.

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