Liability-driven investing (LDI)

Our offerings are designed to evolve with the changing needs of the plan, from long credit and capital efficient rates strategies to end-game solutions such as hibernation and pension risk transfer services.
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What themes have we been seeing among corporate pension plans?

It’s been an exciting time lately for corporate pensions. Average funded ratios have risen to all-time highs since 2008, and a lot of plans are now looking to preserve those levels by taking risk off the table through an LDI approach.

So, at BlackRock we manage over $400 billion in LDI assets globally…and we’ve helped pensions across regions in their de-risking approaches.

What we’ve seen is that customization is a key theme to meet liabilities and preserve funded levels. So, transitioning from the traditional capital allocation-based targets to allocations that look and feel like your liability, that can generally help avoid unintended outcomes. 

We think that plans can benefit from more flexibility in their fixed income buckets, and that they should take a fresh look at capital-efficient Treasury instruments to match their liability rate exposures. One plan we recently partnered with explored the use of levered Treasury funds, and they found they could increase their plan hedge ratio from 35% to upwards of 65%....and that was without adjusting their split of growth vs. fixed income assets in the portfolio. 

Another trend we’ve seen, is that with higher funded ratios, more plan sponsors are considering pension risk transfer, or “PRT”. 2021 has been a big year for PRT deals and it could end up being one of the largest in US history.

It’s really important, when considering PRT, to get customization right. The last thing a plan sponsor wants to happen, is for a deal to fall off track due to the markets. And this requires finding partners, with experience, that can customize the hedging strategy, and pay careful attention to both lump sum activity and insurer pricing dynamics.

Now, at BlackRock we’ve supported over $17 billion in pension risk transfers in the US, and we have experience with managing transaction cost savings and customization to help provide better outcomes for our clients and their participants.

What themes have we been seeing among corporate pension plans?

Matt Nili, Managing Director and Head of U.S. and Canada Liability Driven Investing (LDI) provides an update on recent themes we have been seeing among corporate pension plans.

Why BlackRock for LDI?

Our LDI platform provides defined benefit plan sponsors with the power and flexibility of one of the most comprehensive fixed income businesses in the world, combined with proprietary asset-liability focused technology.

Custom liability expertise
An expansive platform to create an optimal strategy tailored to navigate each client’s unique situation, sensitivities and objectives.
LDI investors can benefit from our risk management technology through Aladdin systems, tools and reporting.
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We offer solutions for LDI investors looking at both diversifying credit investments and capital-efficient rates strategies.

LDI custom solutions

BlackRock’s flexible platform seeks to deliver a range of custom LDI solutions to meet client needs.

All potential solutions will start with an in-depth analysis of a client’s liability profile, including an analysis of sensitivity to both Treasury rate and credit spread movements.

We customize solutions to account for a number of client specific aspects, including:

  • Custom asset-based benchmarks that approximate the duration and curve profile of the liability
  • Liability cash-flow based benchmarks, where the portfolio allocation is monitored over time versus a client’s unique cash flow stream
  • Completion management, where the portfolio allocation can “bridge” the gap between existing fixed income portfolios and a client’s unique liability cash-flows

As a pension plan moves through the plan lifecycle, we aim to offer thoughtful design, implementation, and monitoring to meet custom client needs. Custom solutions can also offer liability relative reporting to monitor the performance of assets to the underlying liability. For more information, we encourage a discussion with your BlackRock relationship manager and the LDI client PM team.

Technology enabled

Aladdin connects the information, people and tools needed to manage money in real time. This offers the benefits of interactive risk reporting and analytics, portfolio management tools, trading regulatory reporting & compliance, operations and performance attribution.
Aladdin Technology

Latest insights from the LDI team

The latest thinking on Liability Driven Investing and Fixed Income Markets

U.S. LDI Pension MarketWatch

Read our latest Monthly LDI Pension MarketWatch where we look at estimated average funded status and monthly market moves including treasury yields, corporate credit and inflation markets.
US LDI Pension MarketWatch

BlackRock team

We believe our size allows us to invest in people and technology, creating comprehensive global coverage and thought leadership across regions.

BlackRock has a dedicated LDI team that develops client solutions in partnership with our portfolio management teams across our fundamental, systematic and index platforms.

Matthew Nili
Managing Director, Head of U.S. and Canada Liability Driven Investing (LDI)
Matthew Nili, Managing Director, is Head of the U.S. and Canada Liability Driven Investment (LDI) business.
Emojoy Brown, ASA, EA, MBA
Director, Client Portfolio Manager
Lynda Dennen Costello, ASA, EA
Director, Client Portfolio Manager
Elizabeth Perry, CFA
Director, Client Portfolio Manager
Candice Mogg
Director, Portfolio Manager

Contact our institutional team to learn more about fixed income

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