Description: As we meet with pension plan sponsors and consultants across Canada we find that the subject of liability-driven investing LDI comes up repeatedly even when we do not initiate the discussion. We also find that LDI seems to mean something different to each person we meet. Is LDI just a new name for asset/liability management ALM? Or is LDI just about hedging interest rate risks with fancy securities? In this article we describe a framework for understanding what LDI is, how it relates to ALM, and how it can be used to solve real-life problems for Canadian pension funds.

Description: Over a short span of two weeks, the financial system has observed the collapse of two mid-sized U.S. commercial banks, California-based Silicon Valley Bank (“SVB”) and New York-based Signature Bank, and a takeover of troubled Credit Suisse by a rival in Europe. Other banks that serve a similar demographic as SVB, such as First Republic Bank and PacWest Bancorp, have also experienced an elevated level of customer deposit withdrawals while their stock prices plummeted. The U.S. Federal Deposit Insurance Corporation (FDIC) quickly stepped in and guaranteed all deposits from the failed banks to prevent a broader crisis in the banking system. The current turmoil in the financial system is a stark reminder of the importance of effective risk management and regulation.