UK- Only 19 % of UK pension schemes have implemented an LDI strategy - despite an expressed need, according to new research from SEI.
Although LDI has become an industry buzz phrase, SEI found only 20% of those polled globally actually employed it, while 33% were not even considering an LDI approach.
SEI said the research demonstrated the confusion and lack of agreement as to how an LDI strategy should be defined.
Patrick Disney, head of SEI’s European institutional business, said: “In the UK there is a lot of talking about LDI but not necessarily a lot of doing as pension funds try to gain a full understanding of how LDI can be used to manage the pension’s impact on the balance sheet.”
In stark contrast to their UK counterparts, SEI said Dutch respondents demonstrated the most advanced understanding of LDI.
The company said Dutch pension fund managers placed LDI squarely in the context of risk management of the entire portfolio, while their foreign counterparts saw it more as a product for matching the duration of investments with obligations.
Commenting on the results, Andrew Cheseldine, a consultant from Hewitt, agreed there was confusion about LDI.
He explained LDI was not a strategy in its own right, but instead should be used to understand and measure what a scheme is trying to achieve.
Cheseldine added that the results for the Dutch respondents highlighted their more conservative interpretation of the rules compared to the UK.
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