Liability-Driven Investment

Liability-Driven Investment (LDI) is an investment strategy focused on aligning assets with future financial obligations, such as pension payouts or insurance claims. Instead of simply seeking high returns, LDI aims to match the timing and amount of expected liabilities with appropriate assets, often using tailored investments like bonds. This approach helps ensure that when liabilities come due, the necessary funds are available, reducing the risk of shortfalls. Essentially, LDI prioritizes safeguarding the ability to meet future commitments by carefully managing assets in line with known obligations.