Climbing a Ladder to Successful Outcomes
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:
- 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.
- The Strategy also recognizes that a pure bond ladder is the natural low risk alterative to our solution.
- 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
LDI
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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