DB schemes’ investment strategies are transitioning from ‘liability-driven investment (LDI) plus growth’ asset allocations to “something that is more credit heavy”, according to Legal & General Investment Management head of endgame solutions, Mathew Webb.

Speaking at the recent PLSA Investment Conference, Webb stated: “Schemes are now moving on from the old world of LDI plus growth environment to something that is more credit heavy.

“That is quite a significant transition action to carry out. They have to liquidate or sell their growth assets and buy a lot of credit. So, it will be interesting to see how that rolls out over the next couple of years.”

He highlighted the importance of DB schemes “having that transition plan and taking the opportunity to create value itself, because if you can time the purchase of that credit you can create extra value”.

In January, research from Aeon found that market volatility is expected to push the majority of global institutional investors and wealth managers to increase investment in active fixed income funds over the next two years as they seek to manage risk and drive returns.

The research, which gathered views from pension schemes, insurance asset managers, family offices and wealth managers, found that 17 per cent of respondents currently invest under 10 per cent of their total portfolio in active fixed income strategies.

Over a quarter (29 per cent) invest between 10-25 per cent, while 34 per cent invest between a quarter and half their portfolio in active strategies, and 20 per cent invest between 50-75 per cent.

However, these allocations are set to increase "dramatically" for 13 per cent of investment portfolios and slightly for 81 per cent, while 6 per cent will stay the same.

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