Investments - LDI funds in spotlight as credit crunch bites

News

Intended to immunise UK pension funds from interest rates and inflation, liability-driven investment (LDI) was supposed to bring peace of mind. But some UK pension funds that adopted LDI strategies have grown concerned as one component of these strategies proves unexpectedly vulnerable to the global credit crunch.

At the heart of LDI lies inflation and interest rate swap contracts, which although routine instruments for corporate treasurers, were until recently unfamiliar to pension fund trustees

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