Liability-Driven Investment Strategies for Pension Funds

Abstract

For many years, pension fund management focused exclusively on managing the assets of the plan. The “perfect storm” that occurred at the beginning of this decade, however, caused asset values to decline as liabilities soared and triggered a steep decline in the funded status of pension funds globally. This experience fostered the development of liability-driven investing—the recognition that pension fund assets should be chosen to match the behavior of a fund’s liabilities.