LDI on platforms – does one size fit all?

Following the Liability Driven Investment (LDI) turbulence last year, there have been multiple interventions from regulators and parliamentary committees to understand the causes of the spike in collateral calls - and work is still underway which is likely to see further regulation of the sector.

Despite the noise surrounding LDI, it is interesting to note that the basic concept of pension schemes matching their assets and liabilities continues to make sense. The questions now are far more about the use of leverage, the need for collateral buffers and whether leveraged LDI remains appropriate for all schemes.

In reality there are still a huge number of UK schemes using LDI as an integral part of their investment strategies as DB schemes mature – and as the dust settles, demand remains for DB schemes to access high quality LDI funds to meet their needs.

We all know that pension schemes have different investment strategies and approaches to meeting their obligation to pay members’ pensions.  Some schemes are better funded than others, some are more mature with different cashflow profiles, and an increasing number are on a flightpath to buy in/buy-out.

This inevitably means there is a demand for a wide range of different styles of LDI funds with different investment strategies.

That’s why the team at Mobius seek to provide exposure to LDI funds from several managers via the platform.  We believe we are unique in that we currently host over 100 LDI funds on the platform across 5 LDI managers.

Not all platforms have this breadth of LDI offerings and restrict schemes to a narrow portfolio of LDI funds or even only to in-house funds.  We believe this approach reduces choice and flexibility and is another reason why schemes continue to choose Mobius as their investment administration provider.

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