Liability-Driven Investing


AUIM developed from its origin as an insurance investment department into a multi-sector asset manager. To this day, AUIM continues to work with major insurance companies to help ensure their assets are well matched to the characteristics of their liabilities. This heritage of sophisticated liability-driven investing is now available to pension plans and other institutions.

AUIM’s Liability Driven Investing (LDI) offers an approach to de-risking corporate and public pension plans and can be implemented as a complement or an alternative to pension risk transfer strategies. Highly customizable, AUIM’s LDI platform can be adapted to a plan’s specific challenges, ranging from straightforward duration matching, to enhancing returns via multi-sector fixed income exposures, and hedging strategies to better immunize the plan against interest rate risk, market volatility and other risks that can threaten a plan’s funding status.

AUIM’s LDI framework begins by partnering with trustees, company management, actuaries and investment consultants to assess the plan and asset-liability matching analysis. This collaborative approach considers the status of the plan, the company and the industry to develop an LDI framework/strategy that is specific to the plan’s liability characteristics. Important preliminary assessments set the path toward the solution and tools necessary to help accomplish the goals that we establish together and regularly revisit; retirement plan characteristics can change, and plan re-assessment is imperative to ensure the solution adapts to liability changes over time.

Plan assessment

  • Plan specifics
  • Client assessment
  • Client goals and risk tolerances

Asset / liability analysis

  • Glide path analysis
  • Hedge ratio considerations
  • Plan actuary collaboration

Strategy development

  • Customized investment strategy development
  • Investment consultant collaboration

Portfolio construction

  • Modified total return approach
  • Strategy implementation

Client Service

  • Reporting
  • Client Dashboard

The Asset Liability Management (ALM) analysis and strategy development phases of our LDI framework provide guidance to help determine what type of solution most effectively fits a plan’s liability needs and the plan’s comfort level with different approaches. For some plans, lengthening asset duration is an appropriate initial step, while others are ready to further improve ALM with an LDI strategy that more finely dissects the liability stream. AUIM currently offers the following solutions:

LDI 101 Duration Lengthening: Fixed Income Products

  • Typically a plan’s first foray into de-risking
  • Natural first step toward creating a glide path
  • Opportunity to quickly improve the hedge ratio
  • Fixed income investment strategies to lengthen duration (like long government credit or multi-asset class)

LDI 201 Cash Flow Matching: A Customized Solution for Retiree Liabilities

  • Could be the next step on the de-risking path
  • Align fixed income assets with plan’s liability profile, specific to retirees
  • Increases hedge ratio and reduces funding status volatility of the plan overall

LDI 301 Simple Derivatives: Consider Unfunded Solutions and Lengthen Duration

  • Increase hedge ratio and decrease funded status volatility
  • Increase credit exposure with credit default swaps while maintaining portfolio duration
  • Increase duration while maintaining return-seeking asset allocation by overlaying interest rate swaps and futures

Distinguishing Characteristics

Highly customized investment solutions, sophisticated derivative capabilities, and seasoned investment team

LDI is in our DNA

Long Government Credit Composite Factsheet

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Composite Disclosures

Click here to download the Long Government Credit GIPS® Composite Disclosures.

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The Multi-Sector Approach Part 1 - An Introduction

Our multi-sector approach can offer the opportunity to enhance a portfolio’s diversification, yield profile and reduce funding status volatility.

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The Multi-Sector Approach Part 2 - The Case for Corporates

The evidence suggests taking incremental risk and owning corporate bonds has been a better strategy for plan sponsors than owning U.S. Treasuries.

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Aegon USA Investment Management, LLC, (AUIM) is a U.S.-based investment adviser registered with the Securities and Exchange Commission (SEC) and a member company of Aegon Asset Management, the global investment management brand of the Aegon Group.