Standard Life Investments

Liability Aware Investing

Liability Aware Investing (LAI), is an investment framework for managing and potentially exploiting the various risks faced by investors who have specific liabilities to meet from their assets.

We purposely describe our own liability management approach as LAI, distinct from the more common industry term, liability driven investment (LDI). LDI has become a label for hedging products on the market, many of which are passively managed, whereas we manage our solutions actively and seek to add value beyond providing a pure liability hedge.

Adopting a LAI approach provides an opportunity for a pension scheme to increase the certainty with which it can meet its payment obligations, without compromising expected returns from its assets or raising the long-term cost of the scheme to the sponsor.

Under an LAI approach, investments are measured relative to the performance of a scheme’s liabilities, rather than an arbitrary market index (the FTSE All-Share Index, for example).

Find out about our Integrated Liability Plus solutions >>