An annuity-style credit strategy allows construction of a portfolio of bonds that is consistent with investors’ liabilities. Investors can target bonds with the most attractive yield characteristics, with every investment made with the intention of holding to maturity.
In this paper
- We compare and contrast the benefits of an annuity-style credit approach with traditional benchmark investing.
- We explore how a tailored approach can target investors’ desired risk and return characteristics. Credit exposure can be matched to a pension scheme’s liability profile and held to maturity.
- Concentrating on cash flow-driven investing means that assets may not necessarily fall into the traditional growth or liability matching buckets. Instead, they fall in the middle ground, intended to provide reliable income at a premium above gilts or swaps.