Liability Driven Investing

PNC Institutional Asset Management®


Actively optimizes portfolios for the long term – based upon unique risk
and return objectives.

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Contact Kimberlene Matthews, Product Specialist


 

 


Our Philosophy

We believe each client’s liabilities and objectives are unique and require a customized process.

  • PNC Institutional Asset Management® has a consultative approach with the client, while working with the client's actuaries and accountants as well. Having everyone work together as a team helps make the client successful.
  • We work closely with each client to develop a customized long-term solution based on each client’s unique risk and return objectives, guidelines and constraints
  • We work diligently to optimize and actively manage the portfolio based on that profile

Our Process

Benchmark: Custom. Based upon the client’s specific liability cash flows.

The primary goal of the Liability Driven Investing (LDI) framework is to manage pension portfolios not from the asset-only perspective, but based on pension liabilities. As a result, LDI strategies are designed to help control pension plan risk defined as volatility of pension funded status while locking in the gains as they occur over time. LDI strategy is fully customized to each pension plan sponsor’s objectives and specifics of their pension plan, and fully reflects current market conditions and funded status of the pension plan.

The LDI approach is related to the entire pension trust, because the key feature of LDI strategy is a commitment to dynamic asset allocation. Typical LDI strategy starts with only a certain percentage of assets allocated to the LDI strategy.

 

However, periodic rebalancing is performed over time according to the dynamic asset allocation rules adopted at the inception of the strategy. The risk profile of a pension plan is analyzed and dynamic asset allocation decision rules are created based on the Asset-Liability Management (ALM) studies, carried out at the inception of the LDI strategy and repeated every 2-3 years.

The main objective of LDI strategy is to minimize the tracking error of assets in relation to liabilities, i.e. to control the variability of pension plan’s funded status. As a result, the most appropriate benchmark for the LDI strategy is the “return” on pension plan’s liabilities, and the liability-based benchmark is the key to accurately assessing the performance of LDI strategies.

Important Legal Disclosures and Information

The PNC Financial Services Group, Inc. (“PNC”) uses the marketing name PNC Institutional Asset Management® for the various discretionary and non-discretionary institutional investment activities conducted by PNC Bank, National Association (“PNC Bank”), which is a Member FDIC, and investment management activities conducted by PNC Capital Advisors, LLC, a registered investment adviser (“PNC Capital Advisors”). PNC Bank uses the marketing names PNC Retirement Solutions® and Vested Interest® to provide non-discretionary defined contribution plan services and PNC Institutional Advisory Solutions® to provide discretionary investment management, trustee, and other related services. Standalone custody, escrow, and directed trustee services; FDIC-insured banking products and services; and lending of funds are also provided through PNC Bank. PNC does not provide legal, tax, or accounting advice unless, with respect to tax advice, PNC Bank has entered into a written tax services agreement. PNC does not provide services in any jurisdiction in which it is not authorized to conduct business. PNC does not provide investment advice to PNC Retirement Solutions and Vested Interest plan sponsors or participants. PNC Bank is not registered as a municipal advisor under the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Act”). Investment management and related products and services provided to a “municipal entity” or “obligated person” regarding “proceeds of municipal securities” (as such terms are defined in the Act) will be provided by PNC Capital Advisors.

“Vested Interest,” “PNC Institutional Asset Management,” “PNC Retirement Solutions,” and “PNC Institutional Advisory Solutions” are registered service marks of The PNC Financial Services Group, Inc.

Investments: Not FDIC Insured. No Bank Guarantee. May Lose Value.