Liability-Driven Investment (LDI) Strategy

Liability-Driven Investment (LDI) is an investment strategy primarily used by pension funds and insurance companies. It focuses on aligning investment assets with future liabilities—essentially the payments they need to make, like pensions or claims. By carefully selecting assets that will generate cash flows matching these obligations, LDI aims to reduce risk and ensure that funds are available when needed. This strategy helps manage the financial stability of an organization by prioritizing the timing and certainty of cash flows over purely maximizing returns.