RT Journal Article
SR Electronic
T1 Liability Index Fund: <em>The Beta Portfolio for LDI</em>
JF The Journal of Index Investing
FD Institutional Investor Journals
SP 44
OP 48
DO 10.3905/jii.2010.1.2.044
VO 1
IS 2
A1 Ronald J. Ryan
YR 2010
UL https://pm-research.com/content/1/2/44.abstract
AB This article deals with a Custom Liability Index (CLI) as the best representation of the client objective when it is a liabilitydriven objective. Once installed, all asset functions should be in harmony with the true objective, unlike tradition where the objective is market driven, leading to an asset-only operation. Asset allocation should focus on the funded ratio (market value of assets and liabilities), and alpha and beta need to be redefined with a liability objective. The core portfolio should be a Liability Index Fund (beta portfolio). Alpha is the excess return versus liabilities, and performance measurement should be the risk–reward comparison of asset growth versus liability growth. All of these asset functions require a CLI to measure and manage.TOPICS: Mutual fund performance, volatility measures, portfolio construction