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Matching

Tailored management of interest rate and inflation risks

What is Liability risk?

Liability risk is the largest investment risk that many pension schemes face. Every scheme has a unique liability profile, which reflects the future payments promised to members of the scheme. Liability risk represents the risk that changes in long-term interest rates and inflation expectations cause the value of liabilities to move.  Every scheme has a unique liability profile, which reflects the future payments promised to members of the pension scheme.

Schroders Liability Driven Investment

At Schroders, we take your unique liability profile and create a tailored matching portfolio to manage your liability risks.

 

Why is Liability Driven Investing so important?


LDI Jargon Buster

Contact us to find out more about how LDI can help

What is Cashflow Driven Investment (CDI)?

CDI is a new take on an established idea. Many schemes do not have sufficient assets to invest entirely in UK government bonds to meet all future pension payments.

To try and meet this shortfall, pension schemes have constructed their investment portfolios to match these payments with lower risk instruments such as UK government bonds, while using higher risk assets such as equities to grow their capital to fill the gap - a traditional growth + matching strategy. CDI solutions involve establishing a portfolio of bonds with contractual cashflows that meet the pension scheme liabilities.

Our approach to CDI is built on five key principles:

  • Provides greater certainty of achieving strategic objective
  • Reduces future disinvestment or reinvestment risk by combining contractual cashflows with credit risk premium to close the funding gap and meet all liabilities
  • Is diversified and covenant aware, using credit assets to deliver higher returns in the earlier years before evolving into a more liquid and insurance-friendly, low-risk portfolio
  • Offers a low governance solution which evolves naturally over time without significant future intervention. On-going oversight and reporting gives our clients comfort
  • Is accessible to clients of all sizes, through the use of pooled products

Please remember that the value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested. This marketing material is for professional investors or advisers only. This site is not suitable for retail clients. Issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No: 1893220 England. Authorised and regulated by the Financial Conduct Authority. For your security, communications may be recorded or monitored.

Contact Schroders

Schroders is a world-class asset manager operating from 32 countries across Europe, the Americas, Asia, the Middle East and Africa.


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For any further questions, please use our online contact form.

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For specific queries, please visit our contacts page to find your Schroders representative.

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