Sage Advisory Services Launches Custom LDI Solution

Providers of LDI strategies have historically focused their services on major pension plan sponsors, the firm says. But the increasing use of exchange-traded funds (ETFs) has expanded the opportunity for smaller pension funds to create asset mixes that closely resemble their liability streams. The strategy can minimize the volatility of plan funded status, an important risk measure for the plan sponsor.

Sage is targeting defined benefit pension plans with between $1 million and $10 million in assets for the new LDI service. Sage will work with these clients to implement an ETF-driven portfolio that allows sponsors to buy individual securities at a cost-effective price point. Portfolios are comprised of credit and government bond ETFs that closely match the duration, yield to maturity, and option-adjusted spread of a plan’s liability benchmark, the firm says. Sage asset managers then adjust the portfolio monthly to reflect changes in the liabilities and the discount curve.

“Through our depth of experience in ETF-based solutions and liability driven investing, Sage can deliver customized solutions for clients of any size,” says Robert Smith, the chief investment officer at Sage. “We focus on purpose-driven investing, and a well-managed ETF-based LDI portfolio is the ideal solution for small defined benefit plans.”

Sage provides daily online access to holdings, characteristics and performance data, as well as custom monthly and quarterly portfolio statements. These reports provide plan sponsors and investors with a full-spectrum view of the performance of the ETF-based LDI strategy relative to their custom liability benchmark characteristics, the firm says.

Key features of the LDI solution include the following:

• Client-specific asset/liability analysis and LDI planning;
• Ongoing guidance on portfolio construction and optimization;
• Monthly rebalancing by experienced fixed income management team;
• Quarterly reporting relating to the specific liabilities of the client;
• Complete annual review of plan status;
• Plan sponsor can set specific fixed income/equity split in accordance with risk tolerances; and
• LDI portfolio is matched to the duration and other characteristics of the client’s unique liability rather than a generic long duration strategy.

More information is available at www.sageadvisory.com.