LDI is an investment framework of managing defined benefit assets relative to the pension plan's liabilities. Within this framework, liabilities become the benchmark and the reference point in assessing the plan's portfolio risk and return characteristics. The investment objectives under LDI may vary but, typically, include aligning asset-liability interest rate sensitivity and/or generating rates of return consistent with, or in excess of, the plan's liabilities.
As pension plan sponsors embrace a Liability Driven Investing (LDI) strategy, they must familiarize themselves with the various approaches available to implement such a strategy. The key decisions plan sponsors must consider are how and when to implement an LDI strategy. Read our in-depth analysis on LDI implementation.