BNY Mellon Subsidiary to Develop LDI Products for Pension Funds

September 4, 2007 ( - Boston-based Standish Mellon Asset Management has created a liability index and other tools to help pension plans monitor the impact of volatility in the equity and fixed income markets.

According to a press release, The Bank of New York Mellon Corporation created the Product Solutions Group (PSG) to develop liability driven solutions for pension funds, a trend that has been gaining steam.

Companies have been paying more attention to techniques such as Liability Driven Investing (LDI) (See Employers Slow to Implement LDI Strategies and Cover: Corporate Plan Sponsor of the Year: Slow and Steady ) and duration – a measure of the sensitivity of the value of assets or liabilities to changes in interest rates.

“Liability driven investing can help pension fund managers protect themselves against a simultaneous decline in their assets just as their liabilities are increasing,” said Peter Austin, managing director of PSG and who also serves as executive director of BNY Mellon Pension Services, in the press release. “We saw this happen in the early part of this decade when the equity markets and interest rates fell in tandem. Lower interest rates increase the liabilities of pension plans.”

The PSG will use four members of the BNY Mellon Pension Services group, which includes two actuaries. The group will also be using Standish Mellon’s expertise in managing fixed income products, including long-duration bond products that are designed to match the liability durations of typical U.S. pension plans.

More information is available at .