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.
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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.
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