Russell Retirement Report 2009: LDI On Course to Reach Tipping Point in the U.S.
2009-01-12 17:36:03 -
In its newly-released Russell Retirement Report 2009, Russell Investments contends that liability-driven investing - a sophisticated approach to pension fund investing that structures asset portfolios so that they behave more like pension liabilities - will finally move from the contemplation stage to become standard practice for defined benefit pension plans across the country. In fact, Russell believes that liability-driven investing could become the foundation for the investment strategies of a majority of pension plans in the United States within the next five years.
"The momentum for LDI has been building over time, has been given fuel by the events of 2008 and will be further accelerated by accounting changes due within the next five years," said Bob Collie, director of investment strategy at Russell and author of the Russell Retirement Report 2009. "Trillions of dollars will be impacted as attitudes shift, familiarity increases and the herd mentality begins to favor, rather than resist, change."
In the 2009 retirement report, Russell outlines how the extraordinary market events of the last few months will lead to an increased focus on liability-driven investing and to changes in the way in which LDI programs are built. The focus of programs will move beyond interest rate risk to incorporate other factors, including credit risk, yield curve risk and timing. In time, the nature of LDI will change again as risk transfer solutions become more widespread.
"LDI programs have been designed primarily around managing interest rate risk, but, in 2008, it turned out to be other risks that mattered more," said Collie. "Biggest of all was equity risk, and counterparty risk worked its way up the list of concerns. Several risks that had been seen as second-order and less pressing are now prime considerations for any LDI program."
The Russell Retirement Report 2009 is available at www.russell.com/rr2009. The new report delves deeply into the state-of-the-art in Liability-Driven Investing and closely examines the consequences of the market events of 2008 on this investment approach.
About Russell
Russell Investments is a global investment company with $180 billion in assets under management as of September 30, 2008. Russell serves individual, institutional and advisor clients in more than 40 countries and provides investment solutions including mutual funds, retirement investments, institutional asset management, implementation services and global stock market indexes. Russell is world-renowned for its depth of manager research, quality of manager selection and access to some of the world's leading investment managers. It helps investors of all sizes put this access to work in corporate defined benefit and defined contribution plans, and in the life savings of individual investors.
With approximately 2,200 associates in more than 20 offices around the world, Russell provides financial services in major financial centers. Founded in 1936, Russell is a subsidiary of Northwestern Mutual Life Insurance Company and is headquartered in Tacoma. Russell operates principal offices in Amsterdam, Auckland, Johannesburg, London, Melbourne, New York, Paris, San Francisco, Seoul, Singapore, Sydney, Tokyo and Toronto.
Russell Investments, a Washington, USA corporation, operates through subsidiaries worldwide.
Russell Investments
Jennifer Tice, 253-439-1858
newsroom@russell.com
