An introduction to liability driven investing in Asia

The rising tide of liabilities in this region makes risk management for insurers and pension funds an increasingly important consideration

Dec 14, 2017 | Nixon Mak and Nicholas Savoulides

Traditionally, an investor’s primary concern is with ensuring that he or she nets a positive return and grows an ever-increasing pool of investable assets. For those investors who must meet future payment obligations, however, such as insurance companies, they also need to think about the other side of the balance sheet and manage potential gaps between assets and liabilities.

Globally, they are increasingly utilizing liability driven investment (LDI) strategies in response to minimize any mismatches on their balance sheets and reduce their surplus volatility levels. Regardless of which strategy they choose, LDI is an approach that is increasingly being considered by Asian institutions who can forecast their liabilities with reasonable certainty.

This paper examines current LDI trends, highlights the challenges and opportunities faced by Asian insurers and outlines key strategies to match future liabilities.

 

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