20 min read

Optimizing LDI Strategies

Map, Investments, Computer

As plan sponsors continue their journey with Liability Driven Investing (LDI), they can better realize their funded status  objectives and outcomes by refining their approach to asset allocation decisions. Rather than considering allocations for return-seeking assets and a liability-hedging portfolio independently, they can adopt a comprehensive strategy for allocating all  plan assets directly alongside liabilities. For years, LGIM America has worked with clients to tailor funded status objectives to the specifics of their plan. This experience has helped us analyze optimization techniques that can help all plans manage funded status in the context of an LDI framework. Even plan sponsors that have adopted an asset liability lens must consider several key issues, including:

  • How to tailor funding status objectives to their plan’s goals.
  • How volatility drag affects funded status returns, and how cash outflows from benefit payments exacerbate volatility drag.
  • How using leverage and a more active LDI investing approach can add value to their asset allocation strategy. 

Our total plan-level approach to pension portfolio decision-making can help address these considerations and generate better potential outcomes.

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Learn more about the investment markets, timely topics and our firm capabilities in this whitepaper.

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Rethinking Overlay Manager Diversification

Portfolio Solutions - 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.

Views and opinions expressed herein are as of the date published and may change based on market and other conditions. The material contained here is confidential and intended for the person to whom it has been delivered and may not be reproduced or distributed. The material is for informational purposes only and is not intended as a solicitation to buy or sell any securities or other financial instrument or to provide any investment advice or service. Legal & General Investment Management America, Inc. does not guarantee the timeliness, sequence, accuracy or completeness of information included. Past performance should not be taken as an indication or guarantee of future performance and no representation, express or implied, is made regarding future performance.

Unless otherwise stated, references herein to "LGIM", "we" and "us" are meant to capture the global conglomerate that includes Legal & General Investment Management Ltd. (a U.K. FCA authorized adviser), LGIM International Limited (a U.S. SEC registered investment adviser and U.K. FCA authorized adviser), Legal & General Investment Management America, Inc. (a U.S. SEC registered investment adviser) and Legal & General Investment Management Asia Limited (a Hong Kong SFC registered adviser). The LGIM Stewardship Team acts on behalf of all such locally authorized entities. © 2024 Legal & General Investment Management Limited. All rights reserved. No part of this publication may be re-produced or transmitted in any form or by any means, including photocopying and recording, without the written permission of the publishers.