Germany - liability-driven investment goes mainstream
A move to a market-based discount rate allied with an increased post-crisis focus on risk management has led some to claim the German pension sector is moving wholesale to an LDI approach. Theodora Tsentas reports
Liability-driven investment (LDI) has been a feature of the European pension sector for well over half-a-decade, with leading proponents focusing on interest rate and inflation risk found in Denmark, the Netherlands and the UK. One laggard in this respect is Germany – a tradition of off-balance sheet pension provision (up to 60% of German pensions are unfunded) and an absence of mark-to-market accounting meant Germany's pension funds did little in the way of LDI in comparison with the majority
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