PT  - JOURNAL ARTICLE
AU  - Ronald J. Ryan
TI  - Liability Index Fund: <em>The Beta Portfolio for LDI</em>
AID  - 10.3905/jii.2010.1.2.044
DP  - 2010 Aug 31
TA  - The Journal of Index Investing
PG  - 44--48
VI  - 1
IP  - 2
4099  - https://pm-research.com/content/1/2/44.short
4100  - https://pm-research.com/content/1/2/44.full
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