Employers Slow to Implement LDI Strategies

June 6, 2007 (PLANSPONSOR.com) - Nearly 80% of executives agree that liability-driven investment (LDI) strategies help control the volatility of a plan's funded status, but only 20% are using these strategies and about one-third are not considering using them, according to a recent poll by SEI.

LDI ties the return on pension assets to the rise and fall of benefit obligations and reduces the exposure of a plan’s surplus to market forces. However, plan sponsors have so far been reluctant to implement such long-duration strategies (See Head of the Class: The Long Haul ). The poll of 226 executives by SEI echoes that.

U.S.plan sponsors are even more reluctant than their European counterparts to implement LDI. According to the poll, The Netherlands appears to be ahead of other countries when it comes to employing LDI strategies, with 64% currently implementing or will implement an LDI approach this year.    Of the four countries polled – The Netherlands, Canada, U.K. and the U.S. – the U.S. plan sponsors were the least likely to employ an LDI approach, 17%.

Nearly 80% of those polled agreed that the goal of LDI is to control volatility of a plan’s funded status, while 46% said it was to control contribution and/or pension expense.

The executives polled oversee pensions with assets ranging from $30 million to over $5 billion.

Complete results of the survey can be obtained by emailing seiresearch@seic.com .