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LDI differentiator: the implementation manager role

Adil Gulamali
Adil Gulamali
Client Director, UK Institutional
Simon Bentley
Simon Bentley
Head of UK Solutions Client Portfolio Management

This mini-series of short articles shines a light on often under-discussed but important factors to think about when structuring your LDI portfolio framework. Here we look at the benefits of employing an implementation manager.

In our previous ‘LDI differentiator’ paper we talked about the importance of integrating third-party funds into the LDI portfolio framework1. The implementation manager role takes things one step further and can help simplify the governance structure for pension schemes, whilst potentially improving investment outcomes and reducing trustee risk.

Under such a solution, the large majority – if not all – of the scheme’s holdings move into the LDI portfolio/wrapper so that the LDI manager can implement the trustees’ investment strategy for them. Manager selection and strategic advice is still provided by the scheme’s investment adviser, and decision making continues to be owned by the trustees, but the LDI manager is then responsible for implementation within a rules-based framework.

The benefits

There are several benefits for pension schemes of having an implementation manager:

  1.  Speed and efficiency of trading execution, maximising
    opportunity and capture
  2. Maximised likelihood of hedge retention (especially in
    stressed market conditions)
  3. Reduced governance burden and operational risk for trustees

Some of the actions an implementation manager can carry out for a pension scheme include: automatically de-risking in response to market level and/or funding ratio triggers; rebalancing to an agreed strategic asset allocation; supporting the drawdown and payback of cash to and from private market investments; and managing aggregate cashflows to facilitate benefit payments.

How does it work in practice?

These services can be delivered via a traditional segregated portfolio or via a fund-of-one. The latter approach is normally preferred if the scheme does not already have a custody account, as custody is provided by the fund wrapper

In the case of a fund-of-one it will be a daily priced/traded fund structure with no upfront set-up costs and full integration of all assets in the LDI hedge design. It is an open architecture structure that can hold a wide range of liquid and illiquid thirdparty funds, with full flexibility on investments and service options depending on requirements.

Whether a segregated account or fund-of-one is used, the key to delivering implementation manager services is the holding of third-party funds within the matching portfolio, as illustrated by the chart below.

LDI

Closing thoughts

So, there are multiple merits to having an LDI manager that can additionally act as an implementation manager. Such a setup allows trustees to retain full control over their investment strategy, while significantly simplifying governance and reducing operational risk.

In conjunction with our ability to integrate third-party funds, this is another example of how we have developed a flexible, effective and tailored LDI offering that is adapted to a constantly moving marketplace. In the final paper of this mini-series we will explore the benefits to pension schemes of holding their investment grade credit allocation with their LDI manager.

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LDI differentiator: the implementation manager role

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LDI differentiator: the implementation manager role

1 Columbia Threadneedle Investments, LDI differentiator: the holding of third-party funds, March 2025

Important information:

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). For marketing purposes.
This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.
In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.
In the EEA: Issued by Threadneedle Management Luxembourg S.A., registered with the Registre de Commerce et des Sociétés (Luxembourg), No. B 110242 and/or Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.
This document may be made available to you by an affiliated company which is part of the Columbia Threadneedle Investments group of companies: Columbia Threadneedle Management Limited in the UK; Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.
 
Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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Important information:

For use by professional clients and/or equivalent investor types in your jurisdiction (not to be used with or passed on to retail clients). For marketing purposes.
This document is intended for informational purposes only and should not be considered representative of any particular investment. This should not be considered an offer or solicitation to buy or sell any securities or other financial instruments, or to provide investment advice or services. Investing involves risk including the risk of loss of principal. Your capital is at risk. Market risk may affect a single issuer, sector of the economy, industry or the market as a whole. The value of investments is not guaranteed, and therefore an investor may not get back the amount invested. International investing involves certain risks and volatility due to potential political, economic or currency fluctuations and different financial and accounting standards. The securities included herein are for illustrative purposes only, subject to change and should not be construed as a recommendation to buy or sell. Securities discussed may or may not prove profitable. The views expressed are as of the date given, may change as market or other conditions change and may differ from views expressed by other Columbia Threadneedle Investments (Columbia Threadneedle) associates or affiliates. Actual investments or investment decisions made by Columbia Threadneedle and its affiliates, whether for its own account or on behalf of clients, may not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not take into consideration individual investor circumstances. Investment decisions should always be made based on an investor’s specific financial needs, objectives, goals, time horizon and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results, and no forecast should be considered a guarantee either. Information and opinions provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed. This document and its contents have not been reviewed by any regulatory authority.
In the UK: Issued by Threadneedle Asset Management Limited, No. 573204 and/or Columbia Threadneedle Management Limited, No. 517895, both registered in England and Wales and authorised and regulated in the UK by the Financial Conduct Authority.
In the EEA: Issued by Threadneedle Management Luxembourg S.A., registered with the Registre de Commerce et des Sociétés (Luxembourg), No. B 110242 and/or Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.
This document may be made available to you by an affiliated company which is part of the Columbia Threadneedle Investments group of companies: Columbia Threadneedle Management Limited in the UK; Columbia Threadneedle Netherlands B.V., regulated by the Dutch Authority for the Financial Markets (AFM), registered No. 08068841.
 
Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.

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