The ultimate objective of pension scheme investing is to ensure that there are sufficient funds to pay the liabilities. Liability Driven Investment (LDI) puts this objective at the heart of a scheme's investment strategy. A key aim of LDI is to manage funding level risk (i.e. the variability of the scheme's assets compared to its liabilities). In practice, this usually means using a range of assets, such as swaps and bonds, to construct an investment strategy that closely matches the behaviour of the pension liabilities. These assets are often referred to as "LDI assets".
Over the past decade, LDI has become a core investment strategy for many pension schemes. It is widely expected that the LDI market will continue to grow significantly as more and more UK defined benefit pension schemes look to reduce pension deficits and minimise funding level volatility as they approach the defined benefit "end game".
Here at Schroders, we have developed a next generation LDI platform to provide pension schemes of all sizes with the wider toolkit to manage the key components of their funding level risks in a capital efficient manner. LDI continues to be a key area of growth for Schroders and we place huge importance on ensuring the high quality of the LDI solution is met with best in class client service throughout the journey of investing with Schroders.
We have a unique approach to LDI which provides our clients with clear benefits:
Schroders offers bespoke segregated LDI solutions, providing a framework to meet the scheme’s liabilities while mitigating unrewarded risk. We currently manage segregated solutions using a variety of structured instruments including Swaps, Synthetic Gilts (Total Return Swaps & Repos), Equity Options, Longevity Swaps and other more exotic derivatives.
Pooled LDI Funds (Matching Plus)
Schroders Matching Plus pooled funds were first launched in 2007 and provide pension schemes with flexible building blocks to invest assets in a way that mitigates the impact on their liabilities of interest rates, inflation and cash flow risks to cover future liabilities. This can be achieved using an efficient amount of capital thus enabling our clients to invest more of their assets for growth. For information on Schroders’ ability to implementation bespoke pooled please contact us.
Schroders’ LDI is underpinned by a specialist group of investment professionals with a wealth of experience and expertise in managing pension scheme risk:
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