Cashflow matching credit

Cashflow matching credit strategies are increasingly being used by pension schemes looking beyond traditional benchmark driven credit exposure, whether as part of a liability-aware investment strategy or simply as a different approach to credit management.

By emphasising fixed income assets with more predictable cashflows, these credit strategies are suited to providing the core allocation of matching assets as pension funds de-risk.

These strategies can be used to fully or partially match liability cashflows while also delivering additional returns over and above a purely UK gilt based approach. This mirrors the way in which insurers invest and is a natural capability for LGIM to provide to pension clients.

Buy and maintain

LGIM’s buy and maintain capability provides investors with diversified, global investment grade credit exposure while reducing the drawbacks of being constrained to market capitalisation benchmarks.

Our strategic approach aims to capture the credit risk premium efficiently in a well-diversified portfolio of securities to preserve value by avoiding defaults and securities that may experience a significant deterioration of credit quality.

The investment process has two distinct parts – the ‘buy’ process which determines initial portfolio construction and the ‘maintain’ process which covers portfolio monitoring, decisions on when to sell securities and when to hold them, as well as how to replace bonds that have been sold and thereby preserve value.

We offer clients a number of ways to access our buy and maintain capability, providing them with a strategy that suits their unique needs.

Why LGIM for cashflow matching credit?

    • Scale and experience – we are widely regarded as a leading global bond investor. Our highly experienced team manages a broad range of active credit portfolios, including more traditional benchmark-aware strategies, as well as absolute return and liability-aware strategies
    • A focus on efficiency – we have an extensive track record of sourcing bonds efficiently, either externally or through internal crossing opportunities. We manage a significant proportion of both the index-linked and corporate bond market and use this scale to reduce long-term costs for our clients
    • Preserving value - while we always aim to hold bonds to maturity, sometimes the landscape can change in a manner that creates significant downside risks for individual companies or sectors. When this occurs we avoid mechanistic selling and look to replace any lost spread or yield over time
    • Macro-thematic approach - our macro-thematic views provide guidance for top-down positioning as well as guiding bottom-up stock selection. This integrated approach has enabled us to deliver outstanding risk-adjusted performance right across our range of active strategies

Past performance is not indicative of future results.

Fixed income strategies

Find out more about our other fixed income strategies.

Benchmark driven credit

Multi-Strategy Fixed Income