Liability-Driven Investing and Equity Duration
11 Pages Posted: 18 Jun 2008
Date Written: January 1, 2008
Increasing interest in liability-driven investing (LDI) in the pension community has prompted many plan sponsors to seek longer-duration investments. Historically, empirical evidence has guided plan structures toward long-duration bonds as an appropriate liability-matching instrument, citing relatively short durations for U.S. equities. However, LDI depends upon accurately measuring duration for assets - including equities. In this article, the Brandes Institute reexamines assumptions used to calculate equity duration and poses key questions for investors to consider when pursuing LDI.
Keywords: ldi, liability-driven investing, pension, plan sponsor, duration, investment, investor, investing, liability-matching, equities, assets, liabilities
Suggested Citation: Suggested Citation