Liability-Driven Investment

Liability-Driven Investment

by Dan Tammas-Hastings
Released June 2021
Publisher(s): Wiley
ISBN: 9781119441953

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Book description

Understand the investment template that dominates the pension industry

Liability-Driven Investment is the practitioner’s guide to this increasingly popular investment template. Already the dominant framework for pension schemes in Europe and the UK, the LDI market is expected to grow significantly with the shift from Defined Benefit to Defined Contribution, and then into Digital Asset Management — or Robo-Advice. With an aging population and significant under-saving globally, more and more finance professionals will need to know how to work within and around the LDI framework; this book provides clear explanations for the framework's usefulness and growing popularity to help practitioners find their bearings in and around the LDI space.

The ultimate goal of LDI is to move beyond simple asset value maximisation and ensure that investors have sufficient funds to pay liabilities. This informative guide digs into that basic premise to show the various mechanisms, guidelines and practices that make up the framework's "working parts."

  • Discover the optimal investment strategies in multiple assets classes
  • Understand the key characteristics of the instruments used, including bonds, interest rate derivatives, and inflation linked products
  • Learn why pension companies and individual investors are moving toward LDI
  • Explore the ways in which the explosive growth of Robo-Advice will change retail investment

Finance professionals have long been accustomed to shifting landscapes — it is taken as a given that prevailing thought and attendant practices will change over time — but the rapid expansion of LDI has taken many by surprise. Having already been established as the dominant framework for pensions, it is clear that the emphasis on LDI will only continue to grow. Liability-Driven Investment tells you what you need to know in order to work effectively with LDI.

Table of contents

  1. Cover
  2. Title Page
  3. Copyright
  4. Dedication
  5. Preface
  6. CHAPTER 1: Liability-Driven Investment and Multi-Asset Class Investing
    1. MOVING BEYOND MODERN PORTFOLIO THEORY: INTRODUCING THE WORLD OF LIABILITY-DRIVEN INVESTMENT
    2. THE CULT OF EQUITY
    3. THE PENSION PROTECTION FUND
    4. SUMMARY
  7. CHAPTER 2: Introduction to Investment Risk
    1. RISK MANAGEMENT
    2. THE IMPORTANCE OF RISK VS RETURN
    3. QUANTIFYING RISK
    4. SYSTEMATIC AND NONSYSTEMATIC RISK
    5. CREATING A RISK PROFILE
    6. SUMMARY
  8. CHAPTER 3: Introductory Steps into the World of Multi-Asset Class Investment
    1. SOME HANDY DEFINITIONS
    2. THE STARTING POINT
    3. INTRODUCING MODERN PORTFOLIO THEORY
    4. MORE HANDY DEFINITIONS
    5. BUT HOW DOES THE ASSET ALLOCATION DECISION WORK?
    6. HOME COUNTRY BIAS:
    7. DEVELOPING A STRATEGY FOR MULTIPLE ASSET CLASSES
    8. QUICK ASIDE:
    9. SUMMARY
  9. CHAPTER 4: Building Investment Portfolios
    1. (FUNDAMENTAL, TECHNICAL AND QUANTITATIVE TECHNIQUES)
    2. AN INTRODUCTION TO SINGLE STOCK SELECTION
    3. THE TYPES OF ANALYSIS
    4. FUNDAMENTAL ANALYSIS OF SECURITIES
    5. TECHNICAL ANALYSIS OF SECURITIES
    6. QUANTITATIVE ANALYSIS
    7. THE PASSIVE VS ACTIVE DEBATE
    8. SO, PASSIVE OR ACTIVE?
    9. SUMMARY
  10. CHAPTER 5: Building Investment Portfolios
    1. CHOOSING THE MANAGER
    2. MOVING ON TO OPERATIONAL DUE DILIGENCE
    3. A SAMPLE (NON-EXHAUSTIVE) LIST OF OPERATIONAL CHECKS
    4. PART 3 PORTFOLIO SELECTION
  11. CHAPTER 6: Moving Towards Liability Driven Investing
    1. THE TIME VALUE OF MONEY
    2. THE BASICS CONTINUED: REAL VERSUS NOMINAL DISCOUNTING
    3. A SIMPLE AND BRIEF LOOK AT BONDS
    4. IMMUNISATION THEORY AND FRANK REDINGTON
    5. AN INTRODUCTION TO INTEREST RATE SWAPS
    6. AN INTRODUCTION TO INFLATION-LINKED SECURITIES
  12. CHAPTER 7: The Defined Benefit Pension Plan and Explicit Liabilities
    1. THE BOOTS EXAMPLE
    2. THE STAKEHOLDERS IN A TYPICAL PLAN
    3. WHAT ARE THE LIABILITIES?
  13. CHAPTER 8: ESG, Governance and the Pensions Industry
    1. THE UN PRI
    2. THE INCREASING IMPORTANCE OF ESG
    3. THE MAIN APPROACHES TO ETHICAL INVESTING
    4. ESG: A SCREENING APPROACH
    5. ESG: AN INTEGRATION-BASED APPROACH
    6. IMPACT-BASED ESG INVESTING
    7. ENGAGEMENT-BASED ESG INVESTING
    8. ESG IN HISTORY
    9. INCORPORATING ESG INTO THE SIP
    10. THE REVISED STATEMENT SHOULD
  14. CHAPTER 9: Moving Beyond Liability-Driven Investment
    1. THE WORLD OF CDI
    2. WHAT IS THE DIFFERENCE BETWEEN LDI AND CDI?
    3. CREDIT WHERE IT'S DUE
    4. CASH FLOW-DRIVEN INVESTMENT IN ACTION
  15. CHAPTER 10: The Statement of Investment Principles
    1. DRAWING UP A STATEMENT OF INVESTMENT PRINCIPLES
    2. A SAMPLE STATEMENT OF INVESTMENT PRINCIPLES
    3. STATEMENT OF INVESTMENT PRINCIPLES FOR THE ABC PLAN
  16. CHAPTER 11: Liability-Driven RoboAdvice and the Development and Digitisation of the Industry
    1. WEALTHTECH: HOW WEALTH MANAGERS AND THEIR CLIENTS ARE EMBRACING NEW TECHNOLOGIES
    2. FROM WEALTHTECH TO ROBO-ADVICE
    3. A BRIEF INTRODUCTION TO ROBO-ADVICE
    4. ADVICE OR GUIDANCE: ROBO-ADVICE OR PARTIALLY AUTOMATED DIGITAL GUIDANCE
    5. FURTHER DEVELOPMENTS IN LDI
    6. WHAT IS CASH FLOW-DRIVEN INVESTMENT?
    7. THE EVOLUTION OF LDI
  17. Index
  18. End User License Agreement

Product information

  • Title: Liability-Driven Investment
  • Author(s): Dan Tammas-Hastings
  • Release date: June 2021
  • Publisher(s): Wiley
  • ISBN: 9781119441953