Liability-driven investing (LDI)

What themes have we been seeing among corporate pension plans?

It’s been an exciting time lately for corporate pensions. The average funded ratio has risen to an overfunded position, and interest rates are now as high as they’ve been in over a decade. Because of this, a lot of plans are now looking to expand their Liability Driven Investing (LDI) programs to help preserve their funded levels.

At BlackRock, we manage over $300 billion in LDI assets globally¹ …and we’ve helped pensions across regions in their de-risking approaches. 

What we’ve seen is that many plans have established their base long duration exposures, but that there’s room to reduce funded ratio risk even further. Taking a closer look at the plan’s target hedge ratios, curve exposures, and even the types of LDI assets used can help avoid unintended outcomes and potentially improve risk adjusted returns.

At BlackRock, we think that plans can benefit from more flexibility in their fixed income buckets. This can include capital efficient Treasury funds, all the way through to private assets.

In this new regime of plan surplus positions, it’s common for plans to be asking, “what’s the right next step?” This requires finding partners with experience. Our LDI team works with clients to combine world class risk technology and pension expertise to help provide better outcomes for plan sponsors and their participants.

¹ BlackRock, as of December 31, 2023.