The solution is a customizable liability driven investment (LDI) strategy that allows a plan sponsor to vary the speed of plan de-risking based on the level of interest rates and its funding status.
LDI 2.0 relies on the implementation of two dimensions of liability driven investing, reports Principal: the traditional asset allocation glidepath that transitions a pension plan from a high equity allocation to high fixed income allocation as the plan’s funding ratio improves, and the transition of the fixed income allocation from core to long duration as interest rates rise. In addition to gaining access to Principal Global Investors’ expertise, defined benefit plan sponsors utilizing an LDI 2.0 solution also have the option to tap into the actuarial expertise within The Principal’s retirement and investor services.
The announcement noted that in today’s investing environment, a traditional LDI approach is less attractive. Plan sponsors and investors are seeking a customized, flexible and actionable LDI strategy that allows for a comfortable pace of plan de-risking based on funding status and interest rates.
“The right LDI solution is different for each plan sponsor, and will vary based on a sponsor’s primary concerns, which may include the level of underfunding, the volatility of funding status or the level of interest rates,” said Mark Cernicky, product specialist with Principal Global Fixed Income.