Strategies & Solutions
Defined Benefit (DB): Pension Risk Management
NISA is a leader in liability-driven investing (LDI) and de-risking strategies for defined benefit (DB) pension plans and other liability-driven investors. We deliver a high level of customization and communication that is central to our approach, built on the following key tenants:
- Risk-controlled strategy design and implementation
- Ability to customize to specific liabilities
- Significant market presence in long duration fixed income and derivatives
- Extensive experience working with pension plans and their advisors
NISA works closely with clients, their consultants and actuaries to understand the liability, customize a strategy, specify a benchmark and risk tolerances and develop portfolio guidelines.
We believe that risks should be addressed in a capital-efficient manner. NISA frequently acts as the overall hedge manager, coordinating with the client and/or its custodian to incorporate non-NISA managed portfolio data into our process, and assess the performance of the overall combined returns and the client’s hedge objectives.
Interest rate risk includes duration differences between the portfolio and liability-based benchmark. Spread or yield curve risk is the difference between performance of the portfolio and the liability-based benchmark associated with changes in credit spreads or the shape of the yield curve. Operational risk includes the calculation and execution of trades required to maintain an LDI hedging objective and requires the coordination of various groups within NISA, as well as external parties including brokers, custodians and potentially other asset managers. There could be a risk associated with incorporating data from various external sources.
Misestimation of the liability’s sensitivity to interest rates, changes to liability valuation assumptions, or differences between assumptions and experience represents potential actuarial risk.
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This material has been prepared by NISA Investment Advisors, LLC (“NISA”). This material is subject to change without notice. This document is for information and illustrative purposes only. It is not, and should not be regarded as “investment advice” or as a “recommendation” regarding a course of action, including without limitation as those terms are used in any applicable law or regulation. This information is provided with the understanding that with respect to the material provided herein (i) NISA is not acting in a fiduciary or advisory capacity under any contract with you, or any applicable law or regulation, (ii) that you will make your own independent decision with respect to any course of action in connection herewith, as to whether such course of action is appropriate or proper based on your own judgment and your specific circumstances and objectives, (iii) that you are capable of understanding and assessing the merits of a course of action and evaluating investment risks independently, and (iv) to the extent you are acting with respect to an ERISA plan, you are deemed to represent to NISA that you qualify and shall be treated as an independent fiduciary for purposes of applicable regulation. NISA does not purport to and does not, in any fashion, provide tax, accounting, actuarial, recordkeeping, legal, broker/dealer or any related services. You should consult your advisors with respect to these areas and the material presented herein. You may not rely on the material contained herein. NISA shall not have any liability for any damages of any kind whatsoever relating to this material. No part of this document may be reproduced in any manner, in whole or in part, without the written permission of NISA except for your internal use. This material is being provided to you at no cost and any fees paid by you to NISA are solely for the provision of investment management services pursuant to a written agreement. All of the foregoing statements apply regardless of (i) whether you now currently or may in the future become a client of NISA and (ii) the terms contained in any applicable investment management agreement or similar contract between you and NISA.