Pooled LDI solutions

LGIM offers you two distinct pooled options as part of our wider hedging offering, but both have three important characteristics:

  • We make better use of your matching assets to improve your risk/return profile
  • We manage your strategy to take advantage of attractive opportunities
  • We provide education to help you understand how your strategy is performing

Offering different levels of customisation, each option will appeal to different pension schemes, depending on preferences and circumstances.

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LGIM Matching Core LGIM Matching Plus
LGIM Matching Core is designed for pension schemes seeking simple access to an LDI solution in order to reduce funding level volatility caused by changes in interest rates and inflation. LGIM Matching Plus range and single stock gilt and index-linked gilt funds are designed for pension schemes seeking a more tailored LDI solution to reduce funding level volatility caused by changes in interest rates and inflation.
 Key benefits  Key benefits
  • Simple access - four building blocks which can be blended to meet specific cashflow and member longevity liabilities
  • Instrument efficient - we aim to invest in the highest yielding instrument (either gilts or swaps) subject to funding costs at outset and on an ongoing basis
  • Clarity - external benchmark aides monitoring over the long term as we intelligently implement the index
  • Tailored solution using a full range of physical gilt and index-linked gilts funds and derivative-based LDI funds
  • Wide range of hedging options through swaps or gilt-based funds
  • Complimentary modelling of solution(s) based on client’s objectives

LDI scale that works to benefit our clients

We are the largest LDI manager in the UK (KPMG LDI Survey 2015) which we believe is a reflection of our expertise and our ability to provide clients with the most comprehensive and flexible pooled LDI options available.

Cost efficient solutions end to end

By aiming to minimise trading costs we make LGIM’s scale and market access really count for our clients ­– over the past three years we have saved clients an average of £50 million per annum through crossing alone. Our ability to manage pension scheme assets across the entire life cycle also enables us to reduce costs of the life of de-risking mandates. We have a good track record of reducing transaction costs on entering an LDI solution, for example through in specie existing government bond holdings.

Access to LGIM expertise

As the largest LDI manager in the UK, we are confident of the strength of our expertise and believe that we provide clients with the most comprehensive and flexible range of pooled LDI options.

Read our Pooled liability driven investment solutions brochure for more details on how our solutions could help your scheme meet its liabilities.

Key considerations and risks

The underlying investments will not exactly match changes in the value of a pension scheme’s liabilities and schemes will need to be able to generate sufficient return in order to meet liability cashflows (typically LIBOR). Leverage means that for every £1 invested more than £1 of exposure is obtained to interest rates and/ or inflation. Therefore, large moves in interest rates or inflation rates could mean these funds do not hold sufficient collateral. To minimise the risk of this, we have imposed limits on the amount of leverage allowed. These limits are independently monitored by our Investment Risk team.

In the event that there is a significant reduction in liquidity of the repo and/or the total return swap market, then the cost of funding this leverage increases. Under these circumstances, the Directors of the QIF, in their sole discretion, may elect to close the sub-funds in the manner set out under the heading “WINDING UP” in the prospectus. Trustees should consider and understand the risks associated with these funds prior to any investment. These funds are designed to be held as part of a long term LDI strategy.

The manager will seek to minimise counterparty risk by centrally clearing new derivative positions. The funds will remain exposed to the risk that the clearing house defaults but will no longer be exposed to the risk that a counterparty bank defaults.

The funds will have reference to a benchmark for monitoring purposes. The benchmark is designed to invest in the higher yielding assets from a selection of swaps and gilts and is inclusive of typical transaction costs that would be incurred when switching between these assets. The constituents of this benchmark will fluctuate from time to time but will at all times be implemented within the parameters of the Fund’s stated investment objective. Further details on the benchmark can be obtained from your usual LGIM representative.

Further details (including relevant risk factors and fund specific risks) are available in the Description of Funds document which can be obtained from your usual LGIM contact or by visiting www.lgim.com/descriptionoffunds.

Important information

LGIM’s Matching Plus range of Liability Driven Investment Funds is invested wholly in shares of sub-funds of LGIM Ireland (Risk Management) PLC (the “Sub-Funds”); an investment company with variable capital incorporated with limited liability in Ireland under the Companies Act 1963 to 2009 with registration number 478714, authorised as an investment company pursuant to Part XIII of the Companies Act 1990. The Sub-Fund’s prospectus is available on request.

This information is produced by Legal & General Investment Management (LGIM). The instruments used have a range of different risk profiles and these should be understood by pension schemes before making any investments. Pension schemes should ensure they obtain suitable professional advice. The information contained in this document is not intended to be, nor should be, construed as investment advice nor deemed to be suitable to meet the needs of pension schemes.

This web page, and any information it contains, has been produced for use by the trustees of defined benefit pension schemes and their advisors only. It should not be distributed without the permission of Legal & General Investment Management Limited. Legal & General Investment Management does not provide advice on the suitability of its products or services.

Legal & General Assurance (Pensions Management) Limited (“PMC”) is a life insurance company which carries on linked insurance business, it is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. As part of that business, it holds investments divided into separate sub-funds known as PF Sections. The value of each linked policy that it issues is determined by reference to the value of one or more of the PF Sections.

LGIM is authorised and regulated by the Financial Conduct Authority, it provides investment and marketing services to PMC. The ultimate holding company is Legal & General Group Plc.

Legal & General Investment Management, One Coleman Street, London EC2R 5AA. Authorised and regulated by the Financial Conduct Authority.