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Liability Driven Investment

Solutions for every stage of a pension scheme’s journey

As DB pension schemes mature, their liabilities can grow in size and complexity, which often causes pressure on funding levels to increase.

A liability driven investment (LDI) solution from L&G enables you to retain your allocation to growth, while seeking to reduce risk. With extensive scale and experience in the UK pension market, L&G offers pooled and segregated investment solutions that are specifically designed to hedge interest rate and inflation risk.

We also offer solutions that hedge currency risk for clients, and solutions that seek to mitigate downside in equity markets.

L&G has extensive scale and experience in the UK pension market. We were one of the first managers to offer LDI strategies. LDI has become a cornerstone of DB portfolios, helping schemes to manage funding-level volatility and smooth the journey to endgame. With a shift from focusing on conventional and index-linked gilts to now also incorporating cashflow-driven investing and ESG metrics. We have helped to drive significant innovation across LDI portfolios since our first LDI transaction over 20 years ago.

Pooled LDI solutions

Bespoke LDI solutions

 

Our liability driven investment (LDI) solutions seek to reduce the funding level volatility caused by changes in interest rates and inflation. With scheme funding levels having risen, allocations to LDI portfolios are typically focussed towards physical assets, e.g. cash, fixed and index-linked gilts. Leverage is often relatively low, and used to smooth the hedge across curve to ensure a more accurate overall hedge.​

​For schemes seeking to grow funding levels, leverage can also be employed to enable a greater portfolio allocation to growth assets, while maintaining overall hedge ratios to manage interest rate and inflation risk.​

​LDI benchmarks have traditionally been simple real or fixed cashflows (based on a scheme's liability cashflows), discounted by gilts / swaps (plus a fixed margin). However, we’re increasingly finding that some clients may want to evolve their benchmarks to even more closely align with actuarial liability cashflows and endgame objectives. ​

​As part of a bespoke solution we can manage portfolios to more dynamic benchmarks to include factors such as a dynamic discount rate (to account for credit spread sensitivity) and LPI rates (to adapt to the changing inflation sensitivity of LPI increases).​

​We partner together with schemes to construct a bespoke LDI solution using our comprehensive de-risking toolkit:​

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LGIM bespoke LDI solutions can offer you:

  • Liability modelling and solutions design
  • Value-adding implementation
  • Dynamic benchmarking​
  • ESG integration
  • Counterparty risk management
  • Management of underlying assets and collateral processes
  • Full central clearing compliance
  • Detailed risk reporting and performance monitoring
  • Access to LGIM’s team expertise and research.

Our awards

Pension Awards 2025 logo
Professional Pensions Award Winner 2024 LDI
Professional Pensions Award Winner 2024 CDI

Awards should not be considered a recommendation. Past performance is no guarantee of future results. 

Endgame

At L&G, we combine our extensive asset management and insurance expertise to manage each scheme’s journey to their endgame, using the strategies most appropriate to their particular circumstances.​ At every stage along the journey, we aim to help our clients manage their schemes as efficiently and as sustainably as possible, reflecting our broad ESG investment capabilities as part of our purpose to create a better future through responsible investment. Our scale and breadth of offering and expertise enables us to work with schemes of all sizes, helping to create efficient solutions for each.

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Get in touch

Lisa Purdy

Lisa Purdy

Head of DB Solutions Distribution

Muko E-Agwvegbo

Muko E-Agwuegbo

Distribution Executive

Get in touch

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Get in touch

If you would like any further information please complete the contact us form. 

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Key risks

The value of an investment and any income taken from it is not guaranteed and can go down as well as up, you may not get back the amount you originally invested. 

Whilst L&G has integrated Environmental, Social, and Governance (ESG) considerations into its investment decision-making and stewardship practices, this does not guarantee the achievement of responsible investing goals within funds that do not include specific ESG goals within their objectives.