The collective trust’s long, corporate bond exposure can more closely match pension liabilities than generic, long-duration strategies that typically combine corporate and government bonds or use only the latter.
LDI has become an important consideration for pension plans in recent years, particularly because of new regulations requiring plans to more specifically manage their assets toward the goal of paying future benefits. ING said the challenge has been that many LDI solutions are either institutional separate accounts requiring high asset balances or non-customized solutions consisting of a mix of government and corporate credits that do an imperfect job of matching assets to liabilities.
According to Frank Van Etten, deputy head of Multi-Asset Strategies and Solutions (MASS) at ING Investment Management, the new LDI collective trust is innovative in its ability to closely align a pension plan’s assets and liabilities to help ensure that liability volatility can be managed within an expected deviation. The strategy is managed by ING Investment Management’s MASS and Fixed Income teams, including in-house actuarial staff that works to balance the asset-liability mismatch, portfolio yield and concentration risk in a plan’s investment policy.
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