We introduced the Standish LDI PROGRAMME framework in the first whitepaper of this four-part series, outlining key elements of the decision-making process involved at each step in the development of an LDI strategy. The second whitepaper proposed a multi-level solution to the dilemma of establishing liability-hedging benchmarks that offer both strong degrees of 1) liability matching and 2) investability. The third whitepaper took a closer look at the finer points of manager level benchmarks, contrasting the many tradeoffs plan sponsors face when determining the composition of their Liability-Hedging Portfolio. In the final whitepaper of this series, we will examine the special case of completion management, which brings an additional layer of customization and oversight to the multi-level benchmarking approach previously described throughout the series
The Standish LDI PROGRAMME offers a structured framework to help guide plan sponsors through the many decisions that usually emerge when embarking on an LDI journey. Properly evaluating all key areas that impact a de-risking strategy and crafting a plan upfront can help achieve more predictable funded ratio outcomes over time. But even the perfect plan, if poorly executed, will fail. It is the completion manager’s responsibility to oversee the proper implementation of the plan level objectives.
Completion management can be thought of as a special case of the multi-level benchmarking approach. It is a manager level assignment that goes beyond the traditional fixed income investment process and focuses instead on the plan level liability hedging objectives. This is why we view completion management as the capstone of an LDI strategy implementation, bridging gaps that may exist between the plan’s ultimate hedge budget and the contributions of each manager.
There are many advantages to establishing a completion management program that go beyond execution benefits. Overall, the additional oversight on key risk factors driving funded status volatility improves investment governance in the achievement of the liability hedging objectives. Each mandate can vary across the customization spectrum and some implementations can be influential at several stages of a de-risking journey. Therefore, plan sponsors should evaluate the many facets of completion management thoroughly to determine whether the plan could benefit from this strategic partnership over time.