Watch Out for “Liability Driven Investments”

Check your defined benefit pension plan to see if you are invested in “Liability Driven Investments” (“LDI”). If so, we strongly suggest you contact this firm, or another law firm that handles ERISA litigation, for a due diligence review on your investment portfolio. A “Liability Driven Investment” likely involves a debt-based derivative investment (a “bet”)–the kind that caused the entire financial system to implode in 2008.

Almost everyone is aware by now that the UK pension system very nearly imploded last week (Oct. 16, 2022), which caused its new prime minister, Liz Truss, to resign after only 44 days in office. What is not well known is that a Liability Driven Investment strategy was apparently at the center of the pension system’s near-meltdown. Put differently, it is clear that derivatives were at the core of the LDI strategy–we just don’t know–yet–what specific types of derivatives were used and who the counter-parties were.

For now, it is advisable that anyone whose pension managers have investments based on Liability Driven Investments to carefully evaluate the nature of that investment and to immediately obtain information from the plan sponsor and investment advisor to help you understand where your money is.

If you have a pension investments in one of these funds, we recommend you seek a portfolio review from us, or from another firm that does ERISA litigation.  Initial consultations are performed without charge by us, and by many other firms.  Don’t let your pension investment implode because of a leveraged derivative investment.