Liability-driven investments: new landscape

What now for liability-driven investments, after last year’s crash in the market? Pensions experts Rakesh Girdharlal and Moiz Khan say it should lead to a more balanced approach

Liability-driven investment (LDI) grew in prominence at the turn of the millennium in response to a changing landscape for defined benefit (DB) pension schemes. During the past two decades, it has increased in popularity to become a core investment and risk-management strategy.

More recently, however, LDI attracted negative attention in the press when many schemes experienced severe collateral challenges in their LDI strategies immediately after the September mini-budget. This raised several questions about what LDI actually means, why DB schemes use it and what caused the problems. How can LDI evolve from here?

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