As schemes mature, the accuracy and efficiency of an LDI portfolio become increasingly important. It is, therefore, vital that schemes do not feel limited to the LDI solution and service provided by their incumbent manager. There is often apprehension about the perceived complexity of changing an LDI manager, and we seek to address some of these concerns, for both pooled and segregated mandates.
We have heard consultants and pension schemes compare the process of changing their LDI manager to going through a divorce — expensive and messy! We, however, believe it is closer to upgrading your phone — finding the best package tailored to your requirements,at the right price and with the best service.
As LDI mandates and their implementation have changed over time, it is much easier and less costly now to move mandates from one manager to another, for both pooled and segregated accounts. These changes include a move away from swaps-based to gilt-based hedging for many schemes. Where swaps-based hedging is still in place, the widespread move away from bilateral swaps and non-cash CSAs towards cleared swaps and standardised legal agreements has materially reduced transaction costs.
This information is for informational purposes only, not to be construed as investment advice or a recommendation or offer to buy or sell any security. Investors should always obtain and read an up-to-date investment services description or prospectus before deciding whether to appoint an investment manager or to invest in a fund. Any views expressed herein are those of the author(s), are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may make different investment decisions for different clients. There are no guarantees regarding the achievement of investment objectives, target returns, portfolio construction, allocations or measurements such as alpha, tracking error, stock weightings and other information ratios. The views and strategies described may not be suitable for all investors. SSGA does not provide tax or legal advice. Prospective investors should consult with a tax or legal advisor before making any investment decision. Investing entails risks and there can be no assurance that SSGA will achieve profits or avoid incurring losses.
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