Institutional

Diversified LDI

  • Liability headwinds and spread capture constraints can make it challenging to outperform liability returns over time
  • Issuer concentration risk tends to grow and diversification to lessen within the Liability Hedging Assets (LHA) portfolio as a plan is de-risked
  • A potential supply shortage in the long duration corporate bond universe could be a challenge to de-risking

Outside of traditional long duration corporate exposure, what other strategies can help plans achieve a duration hedge while providing a sufficient return above the liability?

We believe a strategy that utilizes a diversified credit strategy alongside an overlay to hedge the duration and key rate exposures of the liability can deliver returns in excess of the liability over time while protecting against interest rate risk.

Charts are illustrative for presentations purposes only and may not reflect actual contribution to risk.

The data is not intended to represent any actual portfolio managed by Loomis Sayles. Actual portfolios will differ.
Diversification does not ensure a profit or guarantee against a loss.

The ability of an actual portfolio to deliver the required cash flows is not guaranteed and is subject to a variety of factors including, but not limited to, the availability of bonds, active management and trading, transaction costs, default risk, reinvestment risk, rebalancing risk and liquidity risk.

Commodity, interest and derivative trading involves substantial risk of loss.

Any investment that has the possibility for profits also has the possibility of losses.

This is for informational purposes only and should not be construed as investment advice. Investment decisions should consider the individual circumstances of the particular investor. Any opinions or forecasts contained herein reflect subjective judgments and assumptions of the author and do not necessarily reflect the views of Loomis, Sayles & Company, L. P. Investment recommendations may be inconsistent with these opinions. There can be no assurance that developments will transpire as forecasted. Examples and analysis are provided for illustrative purposes only and do not represent actual accounts. Accuracy of data is not guaranteed but represents our best judgment and can be derived from a variety of sources. Opinions are subject to change at any time without notice.