Liability-Driven Investing (or “LDI”) has emerged in recent years as an investment framework that monitors investment risk and return objectives relative to a market-based value of liabilities. An LDI approach seeks to manage growth and volatility in the relative value of assets and liabilities – the most important drivers for many clients in meeting long-term income or expenditure objectives.

At RBC GAM (US), we aim to deliver exceptional service to clients and their advisors through a very clear understanding of the economic nature of liabilities and the regulatory and accounting rules impacting their measurement. This allows us to make a meaningful contribution to the development of investment solutions and manage liability-related risks.

We follow five key steps to develop and monitor successful LDI strategies:

1. Decide which estimate of future obligations reflects the primary objective (e.g., Pension Plan, Workers Compensation, Other Post Employment Benefits (OPEB), Bank Owned Life Insurance (BOLI), Nuclear Decommissioning Trusts, etc.), and analyze the present value of these obligations in market value terms to understand the sensitivities to interest rates and inflation.
2. Build a Minimum Risk Portfolio (or “MRP”) that matches the investment characteristics of the liability cash flows as closely as possible.
3. Compare different investment strategies to the MRP to identify potential strategies that enhance the expected return of the plan’s assets while still meeting clients’ “risk budget” relative to the liability benchmark.
4. Set an appropriate asset mix benchmark that reflects the chosen investment strategy.
5. Monitor performance relative to the asset mix benchmark (or portion thereof relevant to their mandate) and the asset mix policy decision relative to the MRP or liability benchmark.

Name	Position	Email	Telephone #
Amy Carlson	Client Service Associate		612.376.7070
Amy Carlson coordinates client service activities for many of our institutional clients, including our liability-driven investing (LDI) solutions clients. Amy’s responsibilities include collaborating with clients and portfolio managers to ensure that our clients receive appropriate service and reporting. She also organizes meetings with clients and their portfolio managers. Before joining our Client Service Team, Amy worked as an analyst in our fixed income division beginning in 2001, most recently as a member of the short term research team. Before joining RBC GAM (US) in 1999, she worked in U.S. Bank’s corporate trust division as a debt management analyst. Amy began working in the investment industry in 1994. She is pursuing a CFA charter.