28 Oct 2020
20 min read

A Discussion on How the Evolution of LDI Pertains to Managing a Cash Balance Plan

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Viewpoints

Liability driven investing (LDI) has been established as an effective strategy to increase predictability and reduce volatility for defined benefit plan sponsors. The use of LDI has grown over time as plan sponsors have experienced the pain of large fluctuations in funded status. We have seen plan sponsors implement LDI programs as a journey, starting with simpler programs that better align assets with the plan’s liability profile, then moving to a more customized approach over time. Some plan situations, like cash balance plans, may require an element of customization to achieve their hedging objectives. In our conversation with Ben and Ciaran, we discuss the evolution of LDI and custom strategies and specifically, how they pertain to managing a cash balance plan.

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