More than half (57 per cent) of corporate pension schemes use LDI, with half of those implementing LDI investing more than 40 per cent of their portfolio in an LDI strategy, research from SEI has revealed.

According to the global poll of 125 corporate pension executives from the UK, Netherlands, US and Canada, the foremost goal in using LDI was ‘controlling the year-to-year volatility of the funded status’ cited by 76 per cent of UK respondents. This is an increase from 62 per cent in 2011.

In the UK, the goal of ‘progressing the scheme towards buyout’ was cited as a priority by 48 per cent of respondents, down from 75 per cent last year. This was explained by SEI as coinciding with a sharp fall in funding levels across 2012, possibly making pension buyouts prohibitively expensive.

SEI Institutional Group’s European advice director David Hickey said: “Pension schemes are increasingly focusing their attention on managing the most important aspect of the scheme: funding level. There is a clear recognition that market volatility shows no sign of abating, resulting in the need for innovative strategies that provide greater strategic control of schemes.”

Share Story: