LDI Slow to Catch on with Small European Plans

November 19, 2007 (PLANSPONSOR.com) - Liability-Driven Investing (LDI) may be taking parts of the defined benefit world by storm, but that apparently does not yet include small European plans, a new survey found.

According to the survey commissioned by Dow Jones Online Financial News, 35 of the 38 European plans surveyed (total of EUR79 billion or $115 billion in assets) said they have stayed completely away from the LDI trend.A scant three of the plans are thinking of making a move to LDI while 27 said it was not even on their strategic radar screen.

According to John Belgrove, senior investment consultant at Hewitt Associates, LDI strategies are more common in large U.K. corporate plans.

Antigone Theodorou, director of investment solutions at Axa Investment Managers, said at a roundtable sponsored by Financial News that the figures reflected uncertainty about LDI strategies among pension funds. “There is an element of the unknown here. Plans would like LDI solutions to be tested over time by others rather than being the first to implement it,” Theodorou told the meeting, according to Dow Jones.

The survey also revealed pension funds using and considering LDI are taking different approaches, including interest rate swaps and alternative investments, such as private equity and hedge funds, the Financial News report said.