PT  - JOURNAL ARTICLE
AU  - Sanjiv Das
AU  - Seoyoung Kim
AU  - Meir Statman
TI  - Coming Up Short: <em>Managing Underfunded Portfolios in an LDI-ES Framework</em>
AID  - 10.3905/jpm.2014.41.1.095
DP  - 2014 Oct 31
TA  - The Journal of Portfolio Management
PG  - 95--108
VI  - 41
IP  - 1
4099  - https://pm-research.com/content/41/1/95.short
4100  - https://pm-research.com/content/41/1/95.full
AB  - The authors present a liability-directed investment (LDI) rebalancing framework that is based on expected shortfall (ES), denoted as LDI-ES, to prescribe remedies for an underfunded portfolio. Investors endowed with some current wealth optimize their target wealth at the end of N periods, subject to their tolerance for shortfalls from that target wealth. The authors contrast LDI-ES rebalancing with fixed-proportions rebalancing, in which portfolio allocations are rebalanced to ratios, such as 60:40, at the beginning of each of N periods. They consider critical issues of underfunding, in which no portfolio can meet the shortfall constraint, as well as the effectiveness of portfolio infusions in resolving underfunded situations relative to other measures, such as increasing risk, cutting back on target liabilities or goals, and extending the portfolio horizon.TOPICS: Portfolio construction, in portfolio management, pension funds