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Liability Driven Investment

The investment strategies pursued by Irish Pension schemes are changing. During the past decade, we have moved away from peer group comparisons to scheme specific benchmarks based on market indices. Now we are beginning to see a shift towards 'liability driven' strategies. But what exactly are liability driven strategies? 

 
A liability driven solution is an investment strategy that has, at its core, a transparent linkage between pension fund assets and liabilities. Whilst pension funds have always invested assets to meet their liabilities - that is their primary purpose - this transparent linkage has hitherto been elusive.
 
No single event / catalyst is behind the shift toward liability driven strategies. We have witnessed a range of regulatory changes, volatile investment markets, falling interest rates and declining funding levels. Coupled with this, advances in corporate finance have expanded the investment opportunities for pension funds. Each of these has contributed to a fundamental re-examination of contemporary pension fund investment strategy
 
Irish Life Investment Managers (ILIM) has been at the forefront of LDI development and innovation. At ILIM, we have developed simple, understandable and pooled investment products that help sponsors and trustees alike to manage the long term liabilities and risks of pension schemes.
 
Whereas in the past, large pension schemes have had the luxury of having tailored solutions created on their behalf by asset managers or investment banks, ILIM have focused on pooled funded solutions: a suite of unit-linked funds spanning both the real & nominal curves and available to investors of all sizes.
 
We believe that pooling offers a great number of benefits to investors, including:
 
Cheaper custodianship and administration 
Greater flexibility, especially for smaller clients 
Asset manager acts as principal in derivative agreements, legals 
Taking advantage of ILIMs scale (including strong positive cashflows) 
Investment in "tangible" assets 
This simple approach has been very well-received in the Irish market and ILIM are seeing strong product growth. To date, we have seen strong cashflows into our pooled LDI products with significant funds expected through transitioning programs.
 
For further detail on LDI solutions, please contact your Portfolio Manager directly or click here to contact ILIM.
 
For the Duration Bucket Fund Fact Sheet, click here