@article {Simonian130, author = {Joseph Simonian and Ognjen Sosa and Ed Heilbron and Michael Senoski and Thomas McFarren}, title = {Capital-Market-Aware LDI: Actively Navigating the De-Risking Journey}, volume = {44}, number = {2}, pages = {130--135}, year = {2017}, doi = {10.3905/jpm.2018.44.2.130}, publisher = {Institutional Investor Journals Umbrella}, abstract = {In corporate pension portfolios, de-risking from stocks to bonds is often driven by funded status, with the bond allocation increasing as funded status improves. A question naturally arises out of the practice of de-risking: If de-risking based on funded-status improvement is an effective way for plans to preserve gains, does re-risking a plan{\textquoteright}s portfolio as funded status deteriorates prove to be an effective way to recover from losses? To answer this question, the authors compare funded-status-driven re-risking to an active re-risking strategy driven by market factors. They find that re-risking driven solely by funded status adds marginal value at the cost of potentially significant additional risk, whereas an active approach to re-risking may assist in both generating alpha versus the liability as well as mitigating downside risk.TOPICS: Retirement, risk management}, issn = {0095-4918}, URL = {https://jpm.pm-research.com/content/44/2/130}, eprint = {https://jpm.pm-research.com/content/44/2/130.full.pdf}, journal = {The Journal of Portfolio Management} }