Liability Aware Investing

Defined benefit pension schemes face certain liability risks and investment-return requirements when meeting their payment obligations. This is where liability aware investing comes in, providing a framework within which they can proactively manage these aspects.

Liability aware investing is a strategic priority at abrdn. We have been diligent in creating an effective platform to ensure that we can work in partnership with you to deliver the solutions and services you seek.

We have an enviable depth of capability in both liability driven investment (LDI) and fixed income (both liquid and illiquid instruments). This, combined with our insurance heritage, places us ideally to help you with your LDI and cashflow matching requirements. These capabilities make us well positioned to guide you to your endgame, be that self-sufficiency or buyout-ready solutions.

Our Liability Aware fund range includes a range of pooled fund ‘building blocks’ that allow solutions to be tailored to the needs of small and medium-sized pension schemes.

• Integrated Liability Plus Solutions (ILPS) Funds

  A unique, innovative approach to liability management providing liability hedging plus exposure to a range of growth engines in a single fund, making efficient use of collateral.

  
  

• Liability Driven Investment (LDI) Profile Funds

  A range of pooled LDI profile funds that are gilts-based, providing a low cost and low governance approach to hedge interest rate and inflation risks.

  
  

• Buy and Maintain Credit Funds

  For maturing pension schemes where meeting outgoing cashflows is increasingly important, our credit solutions provide income to help meet their benefit payments.

  
  

abrdn Solution Design Service

Solutions are at the heart of what we do at abrdn and our dedicated pension solutions team are committed to working with clients of all sizes to help them meet their objectives.

Our sophisticated in-house design systems are used to help clients and their consultants build robust investment solutions that best match clients’ needs for growth, hedging and cashflows.

For defined benefit pension schemes looking to control both asset and liability risks while maintaining return targets, with every £1 invested providing £1 of exposure to liability hedging and £1 exposure to growth.

The funds aim to meet the dual objective of many, typically underfunded, pension schemes as they aim to both:

• Provide protection (i.e. hedge) against changes in the value of liabilities arising from movements in interest rate and inflation expectations;
• At the same time, produce a positive long-term return

A fund range which allows pension schemes to hedge their interest rate and inflation risks through a transparent, low-cost and low-governance approach.

The range of hedge profiles, alongside our ILPS and CDI funds, allows schemes to refine the liability hedge, cashflow and growth to the scheme’s specific requirements.

Following closure to new members, many DB schemes are now becoming cashflow negative, i.e. where benefit outgo exceeds income from contributions and investments. Attention is therefore moving towards arranging scheme assets to deliver the income required to pay benefits, often referred to as Cashflow Driven Investment or CDI.

Our award-winning* Liability Aware CDI and longer-dated credit fund range can be used by pension schemes to create a bespoke cashflow payment profile that fits their particular scheme’s future cashflow requirements after allowing for contributions and income from other assets such as private debt or real estate.

*Pensions Age Cashflow Driven Investment Manager of the Year 2022

These funds are managed by our Fixed Income team who are very experienced at managing buy and maintain credit and has a strong track record of avoiding defaults and downgrades. For more information please visit our Fixed Income site.

Liability Aware CDI Funds

These are a series of three-year “buckets” that allow schemes to achieve a tailored portfolio aligned with their future cashflow requirements to 2034.

The funds aim to deliver a relatively predictable series of cashflows from a portfolio of nominal GBP corporate bonds – with coupons and maturities paid out over time.

Liability Aware Credit Funds

The final two Buy and Maintain Credit funds form our Liability Aware Credit Fund range and invest in long-dated investment grade corporate bonds maturing between 2035 and 2049.

Both funds expect to invest in nominal sterling and non-sterling corporate bonds to achieve sufficient diversification and target an overall average credit quality of A. Full income is paid out to investors over time in the coupon and maturity phase.

The long-dated Liability Aware Real Credit fund offers a unique and compelling solution for clients looking to hedge inflation risk using credit, with inflation exposure accessed through inflation swaps.