Talking heads – What is happening in liability-driven investing?

Sergey Pergamentsev, head of Institutional Structured Management in the Multi Asset Quantitative and Solutions team, and co-head of the Investment Insights Centre Andrew Craig discuss recent developments in liability-driven investing (LDI), a strategy institutional investors such as pension funds use to match investments and future liabilities.

Listen to our Talking heads podcast as Sergey explains the long history of LDI and its outlook. This may include adjustments in the wake of the pressures the approach came under in the UK recently as hedging exposure and margin calls triggered a vicious circle of bond market selling, ultimately forcing the Bank of England to step in as the buyer of last resort and restore stability.

Sergey expects users of LDI to adjust their stress testing techniques and limit their downside exposure as well as the need for collateral margins. “We also think that there could be a bigger shift from LDI to so-called CDI, cash flow-driven investing strategies,” he concludes.

You can also listen and subscribe to Talking heads on YouTube and read the transcript.

Disclaimer

Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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