Research and publications

Dynamic Liability-Driven Investing Strategies: The Emergence Of A New Investment Paradigm For Pension Funds? A Survey Of The LDI Practices For Pension Funds

A number of profound changes have taken place, which have collectively led to the emergence of a new investment paradigm for pension funds. The standard paradigm for pension fund investments, which ...

Author(s) :

Saad Badaoui, Romain Deguest, Lionel Martellini, Vincent Milhau

Summary :

A number of profound changes have taken place, which have collectively led to the emergence of a new investment paradigm for pension funds. The standard paradigm for pension fund investments, which used to be firmly grounded around one overarching foundational concept of the policy portfolio, is slowly but surely being replaced by a new, more modern, investment paradigm known as the dynamic liability-driven investing (DLDI) paradigm. This new paradigm has two main defining characteristics: on the one hand, a focus on the management of portfolio risk relative to the liabilities, as opposed to absolute risk; and on the other hand, a focus on dynamically time-varying allocation within and across the risky and the safe building blocks. The purpose of this survey is to assess the views of pension funds and sponsor companies with respect to this new investing paradigm and their desire to integrate this approach into their processes. 

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Type : EDHEC Publication
Date : 03/02/2014
Keywords :

ALM and Asset Allocation Solutions