Liability Driven Investment

JPMorgan has a very interesting new survey of liability driven investment (LDI) across Europe (via epn). LDI uses characteristic parameters of scheme liabilities as benchmark and is therefore most relevant to DB and guaranteed return schemes (such as the Swiss).

The survey has the best coverage in the UK, the Netherlands and Denmark / Sweden (where the regulatory environment are rather similar). The survey looks into attitudes towards LDI, asset allocation impacts, the ongoing duration mismatch between liabilities (ca. 20 years) and assets (still below 10 years), derivatives strategies (mostly the usage of swaps) and funding levels with a significant difference between UK deficits (74% of schemes in deficit) and other countries' schemes mostly covered or in surplus.