Liability Driven Investment

Liability Driven Investing (LDI) is a risk management discipline that puts the pension plan’s liability cashflow stream at the heart of its investment strategy.

Our risk management process for Defined Benefit (DB) pension plans is centered on a strategic discussion with the plan sponsor and its investment advisor(s) about the plan’s long term objectives. We then assess the plan’s balance sheet risks with a view towards understanding and hedging the unrewarded risks embedded in the plan’s liabilities, before establishing the level of rewarded risk in its asset allocation. The overall investment solution is a function of several parameters including, amongst others, the plan’s funding level, its proportion of active members, its regulatory funding requirements, and the effect of the plan’s asset allocation on its going-concern discount factor.

Our LDI solutions can also incorporate additional de-risking strategies such as:

  • Hibernation portfolios
  • Insurance-based Pension Risk Transfer solutions
  • Longevity risk hedging

If a Pension Risk Transfer is the DB plan’s long term objective, our investment solutions could progressively adopt an asset portfolio that reflects the insurer’s hedge profile. This strategy, combined with a transfer-in-kind of the portfolio, can minimize both market risks and transfer costs as the sponsor transfers its plan from an LDI strategy with us to a Pension Risk Transfer with the insurer.

Past performance is not a guide to future performance. 

Manage Complexity, Deliver Clarity TM

BMO Global Asset Management is both an award-winning1 and a global market leader in balance sheet and LDI solutions to DB plans, ranking among the world’s top LDI managers. We bring our LDI expertise to more than 485 clients, managing over $167 billion in pension liabilities globally.

Our global industry endorsements include first-rate rankings in:

  • Flexibility
  • Innovation
  • Client service
  • Responsiveness

1 Provider of the Year (2017, 2016, 2015, 2014, 2013 and 2012), Pension and Investment Awards; Risk Management Provider of the Year (2018, 2017 and 2015), Irish Pensions Awards; UK Manager of the Year (2018 and 2017), Professional Pensions Investment Awards; Manager of the Year (2016), LAPF Investments Awards; Manager of the Year 2013, 2012 and 2011, European Pensions; LDI Manager of the Year (2019), Pensions Expert

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