18/11/2009
By Sophie Baker
Adoption of liability driven investment (LDI) strategies has more than doubled across the globe, with the Netherlands taking the top spot, finds SEI.
In a quick poll by the fiduciary management provider, 54 per cent of the organisations questioned have implemented LDI strategies in their portfolios, with the Dutch market reporting a 94 per cent uptake, and the UK at 50 per cent.
SEI said the figures reflect an increase in LDI's popularity over the last three years from a global average perspective. Attitudes towards LDI were also found to have changed over the last three years, with 70 per cent across the globe admitting that the past year's volatility had increased the value of LDI. More than a third of participants who already used LDI said they had implemented it within the last year.
"The market turmoil of late 2008 and early 2009 caused a significant rise in DB pension deficits because return orientated assets generally fell in value and interest rates hit new lows," commented Charles Marandu, director of European advice for SEI's institutional group. "As a result, many pension funds have increased their interest in and adoption of LDI strategies. It is our belief that the Netherlands has led the charge in this area because of a combination of legislation and progressive thinking by those responsible for running pension funds. The high take-up of Fiduciary Management in the Netherlands has clearly led to a better appreciation by Dutch pension scheme decision makers of the potential value of a liability driven approach. It can be argued that by comparing credit crunch experiences with schemes in the Netherlands, many UK pension scheme decision makers are coming to the same conclusion - that improved governance can lead to better outcomes."
The survey, which formed part of SEI's Third Annual Liability Drive Investing Poll, also found that not many participants are moving away from LDI strategies, with 90 per cent of those who do not currently employ an LDI approach never having done so in the past.
In 2007, 43 per cent of Netherlands funds were using LDI, which rose to 61 per cent in 2008.
150 pension executives who oversee pensions in Canada, the Netherlands, the UK and the US participated in the global poll.
