RT Journal Article
SR Electronic
T1 Practical Applications of Capital-Market-Aware LDI: <em>Actively Navigating the De-Risking Journey</em>
JF Practical Applications
FD Institutional Investor Journals
SP 1
OP 5
DO 10.3905/pa.6.1.270
VO 6
IS 1
A1 Joseph Simonian
A1 Ognjen Sosa
A1 Ed Heilbron
A1 Michael Senoski
A1 Thomas McFarren
YR 2018
UL https://pm-research.com/content/6/1/1.4.abstract
AB In Capital-Market-Aware LDI: Actively Navigating the De-Risking Journey, published in the 2017 special multi-asset-class issue of The Journal of Portfolio Management, Joseph Simonian, Ognjen Sosa, Ed Heilbron, Michael Senoski, and Thomas McFarren, all at Fidelity Investments in Boston, examine an active management strategy based on a formulaic trigger mechanism and compare its performance with a basic 60/40 asset allocation strategy. They conclude that the trigger-based active strategy outperforms the 60/40 allocation.The authors then apply the trigger-based active strategy to the case of a pension fund that is assumed to be in the process of de-risking as its funded status improves over time. They conclude that a using the trigger-based active strategy as an overlay to the de-risking process improves returns and lowers risk. They also find that a strategy of potentially re-risking a pension fund based on a worsening funded status is significantly weaker.TOPICS: Retirement, risk management