Mercer Unveils LDI Offering for Defined Benefit Plans

An MGI news release said the program features the new MGI Ultra-Long Duration Strategies, which have durations currently ranging from 15 to 40 years.

MGI said it designed the offering to be used in conjunction with MGI’s other fixed income capabilities in customizing client portfolios through its LDI program. MGI offers the new product through a manager of managers approach in which assets are managed by one or more subadvisers selected by MGI.

“As the trend to close or freeze defined benefit pension plans in the US continues, sponsors are becoming aware that freezing or closing a plan does not in and of itself mitigate risk and that a mismatch between liabilities and assets still represents significant financial risks for the organization,” said Phil de Cristo, President of Mercer Global Investments, in the news release.

MGI said the offering “will be of particular interest” to plans with between $50 million and $1 billion in assets.

As a first step, MGI will analyze a plan’s liability structure and its potential volatility and develop an appropriate risk budget for the investment portfolio. MGI then designs an asset management strategy that may employ several of its fixed income Strategies including the MGI Ultra-Long Duration Strategies, the company said.

The new product will invest in pools of swap instruments rather than traditional fixed income securities to achieve their target durations, because MGI believes that traditional securities are not available with sufficient liquidity beyond durations of 20 years, according to the announcement.

According to the news release, depending upon a client’s needs and preferences, MGI will provide its investment services alone or as part of a bundled, integrated offering.