As LDI seeks to reduce asset-liability risk, some in the DB plan community suggest that active risk should be toned down in LDI portfolios. Doing so, however, may undermine LDI's objective. After all, to seek a specific return target, less active risk in LDI portfolios likely means larger allocations to return-seeking assets. After careful analysis, we believe active management of LDI assets is more efficient than added allocations to return-seeking assets, and may thus produce better risk-adjusted outcomes.
White Paper: When More Is Less: Dialing Up Active Management in LDI Portfolios May Reduce Risk
Published by: PIMCO
October 4, 2017
PIMCO When More is Less
