- Macro Economic Perspectives
- Interest Rates & Fixed Income Opportunities
- Liability Driven Investing
- Archive - Macro Economic Perspectives
- Archive - Interest Rates & Fixed Income Opportunities
Liability Driven Investing
- A Hedge and a Hope
- A Tale of Two Recessions
- Hibernation: Managing a Sleeping Bear
- Go Long for the Taper Touchdown
Tom McCartan, Vice President, Liability-Driven Strategies, Prudential Fixed Income, January 2016
This paper analyzes the unusual risk characteristics of credit migration, explores what this means for pension asset allocation strategies, and suggests ways plan sponsors can employ LDI to both help meet short-term hedging objectives, while still combating the long-term tail risk of credit migration.
Tom McCartan, Vice President, Liability-Driven Strategies, Prudential Fixed Income, July 2015
U.S. corporate plan sponsors value their defined benefit liabilities using high-quality corporate bond rates for accounting purposes. In recent years, this valuation framework has led many plan sponsors to buy more long-dated U.S. corporate bonds in an effort to de-risk their portfolios and reduce the volatility of their plans' funded status.
Gary Knapp, Managing Director and Head of Liability-Driven Investment Strategies, Prudential Fixed Income, March 2015
Many asset managers today advocate that plan sponsors consider a risk reduction strategy called "hibernation". But just as glidepaths don't always "glide", hibernation is not a passive strategy, but one that needs to be carefully watched. In this paper, we consider how the interplay between a smarter hibernation strategy and different de-risking tools can allow a plan to slowly wind down in both size and risk.
Gary Knapp, Head of Liability-Driven Investment Strategies, and Michael J. Collins, Senior Investment Officer and Credit Strategist, Prudential Fixed Income, January 2014
In this paper, we take a look at the current interest rate backdrop and how the historical steepness of the U.S. Treasury yield curve provides an attractive entry point into longer duration high quality bonds. We also look at some of the risk/return trade-offs of extending duration under different interest rate and yield curve scenarios.