Grappling with liability

Market Impact Special

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Liability-driven investment (LDI) is here to stay and investment banks, fund managers, and consultants are all promoting their LDI solutions. For trustees and sponsors the argument is clear: by using derivative instruments, defined benefit pension schemes can hedge away their inflation and interest rate risks.

But while clever use of swaps and options has made schemes such as WH Smith the darlings of the industry, suspicions remain that if these complex solutions are not used correctly then the c