Liability Driven Investing Explained

Much has been discussed in the media and at the investment committees over the last few years regarding liability driven investing (LDI) at both the defined benefit pension plans and endowment / foundations.

There is still a lot of confusion in the market regarding LDI, what it is, how to implement it and the benefits to plans if they do. We have found this short article ("Liability driven investing and the reassessing of risk") from TD Asset Management useful in answering these types of questions.

As Kevin and Dino explain, LDI is not a product, or a single investment solution, rather it is a way of thinking about investing and the purpose of an investment program. Focus shifts from simply beating arbitrary benchmarks and universe peers to a focus on meeting the promises (or liabilities) of the pension fund, foundation or endowment.