The Role of the LDI Completion Manager
Many plan sponsors have decided to pursue a liability-driven investing (LDI) approach to managing pension assets. At its core, an LDI approach involves managing the assets of the fund in concert with its liabilities.
In many cases taking an LDI approach means the plan sponsor intends to “de-risk” the plan as funded status improves. Typically this outcome is achieved by incrementally reducing the fund’s exposure to growth assets like equities, real estate, and hedge funds while increasing the exposure to liability-hedging assets like interest rates and credit. The trigger for making these changes is often the estimated funded status of the plan at a specific point in time.
De-risking involves several different actions that must be carefully coordinated to maximize the potential for success. For this reason, the operational details surrounding the implementation of a de-risking plan are critical. The LDI completion manager is charged with coordinating and managing the steps necessary to successfully implement the pension de-risking process.
This paper defines in further detail the role the LDI completion manager can play in the de-risking process and how the execution of that role can bring value to the plan sponsor.