ldi keystone

Stay on Target: Managing the Glide Path Using LDI Completion

March 13, 2023

Defined-benefit plan sponsors exert significant effort conducting asset-liability studies to determine an appropriate policy for their glide path. This aspect of pension management becomes a major focus as funded status improves. The goal of this policy is to lock in improvements to funded status by incrementally derisking the portfolio, shifting the asset allocation from return seeking to liability hedging. 

However, this plan often fails to contemplate the practical challenges of implementing the glide path once funded-status triggers have been met. In our view the game plan should be expanded to include two key implementation enhancements:


  • Developing a streamlined mechanism to monitor location along the glide path and triggers
  • Creating a framework for timely, efficient, and risk-controlled movement along the glide path

In this paper we take a brief look at management of the glide path via liability-driven investing (LDI) completion, a natural extension of overlay management that provides the infrastructure to tackle each of these challenges, creating an integrated and holistic framework for more robust governance and risk control.

Richard Fong photo

Richard Fong, CFA

Managing Director, Investment Strategy

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David Phillips photo

David Phillips, CFA, ASA, EA

Director, Liability-Driven Investment Strategies

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Liability-driven investing, Institutional investor