Liability hedging and liability-driven investment

Better manage risk and increase the security of members’ benefits.

Adding value, reducing vulnerability

The crisis in autumn 2022 left many schemes vulnerable. Insufficient collateral, inefficient governance and incorrect liability cashflows caused significant issues for many schemes. We are proud of how we helped our clients navigate this storm; the result of long-term strategies built to withstand volatility.

£400bn+

of assets in DB schemes advised

167

LDI reviews conducted in past 12 months

400

trustee boards advised

8.8

satisfaction score through the 2022 Gilts crisis

How we improve returns and increase stability for clients

We advise clients on all aspects of designing and implementing an LDI strategy including:

Setting strategic targets for hedge levels and a choice of hedging basis
Generating liability cashflows and defining clients’ individual liability benchmarks
Structuring the LDI hedge in line with precise business needs
Selecting the hedging instruments which offer best value
Designing and implementing a bespoke and efficient ‘collateral waterfall’
Independently selecting or reviewing an LDI manager best suited to needs

Solutions that are everything but complacent

With many schemes already well hedged and de-risked, optimising your LDI strategy represents a significant opportunity to create lasting commercial value to a scheme.

Yet many schemes are still being held back by actuaries and consultants taking too long to update historic LDI benchmarks, and LDI managers sitting on inefficient and old-fashioned collateral structures.

At Isio we challenge industry complacency. We work with schemes, sponsors and LDI managers to innovate through new pooled funds and market-leading approaches to segregated mandates. So less collateral sits in cash as a “return drag” and more is put to work to generate returns.

We often find that around 0.5% p.a. can be added to a scheme’s target return with little or no impact on risk, or on the ability to re-collateralise quickly.