The UK’s margin call offers warning signs for public pension funds in the US

In Politics by Michael Rae

The United Kingdom’s pension funds utilize a strategy known as liability-driven investing, where the risk from the market is hedged to keep unfunded liabilities from fluctuating greatly. Liability-driven investing (LDI) is fundamentally different from the typical pay-go or pre-funding structures seen in American public pension systems because it plugs holes in funding from the contributions side rather than employing an investment strategy to do so. LDI is not seen in public pension plans in the United States since they are typically tied to the plan’s assumed rate of return as opposed to market interest rates. That said, there is still