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Cash-flow driven investing: What defined benefit pension schemes should know

March 12, 2018
clock 1 MIN READ

As defined benefit pension schemes lean towards negative cash-flow situations, a growing number are contemplating alternative strategies to meet their pension liabilities. Enter Cash-flow Driven Investing (CDI).

LDI 2.0? Not quite.

It isn’t a departure from LDI, but it is an extension of this traditional strategy. CDI involves building cash flow matching portfolios by using higher yielding instruments. This could mean domestic and overseas credit, illiquid debt, loans or the usual gilts derivative leverage.

CDI may sound promising, but the reality is that today more than ever –  it is difficult for pension schemes to accurately predict their future cash flows.

Our paper details what you need to know when considering this strategy:

  • What exactly makes cash flow a challenging thing to predict?
  • Why do CDI portfolios require expert construction?
  • Why should a total portfolio approach be considered?

Download Cash-flow Driven Investing  (PDF)

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Cash-flow driven investing

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