Average allocation to CDI doubles over 18 months
The average pension scheme allocation to cashflow-driven investment (CDI) assets doubled over the 18 months to June this year, according to RiskFirst.
As schemes continue to mature, more are seeking to invest in infrastructure, private credit, and multi-asset credit, while reducing their allocation to return-seeking investments, such as equities.
CDI attempts to provide a risk-adjusted portfolio of assets that matches the timing of underlying cash inflows from assets with cash outflows from liabilities.
However, the move could also indicate a belief among investors that a recession is looming, RiskFirst said, perhaps in the next 12 to 24 months.
The dataset - compiled by its risk management platform, Pfaroe - looked at the average allocation to CDI from around 3,000 UK- and US-based defined benefit (DB) pension schemes with over £1trn of assets. It found that the CDI allocation had grown from 10% at the start of last year, to 20% this year.
In particular, infrastructure allocation had grown most within CDI strategies. When excluding allocations to buy-and-maintain credit and real estate, which dominate these approaches, infrastructure assets had grown from 22% to 33% over the period.
In contrast, high yield allocations within CDI portfolios had fallen from 22% to 9%, and private credit had risen by just two percentage points to 16%, although the average allocation varied markedly between 11% and 16% over the 18-month period.
RiskFirst chief executive Matthew Seymour said: "While no-one knows for a fact when the next recession will kick in, our data shows that one thing is certain: CDI is not just an idea but a strategy whose time has come.
"As CDI becomes more important, ready access to asset and liability data, and being aware of both broader asset and liability trends, are becoming increasingly integral to both the asset owner and growing asset manager client base."
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