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Watch Out for “Liability Driven Investments”

2022 Oct 24Pension Litigation

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.

The Largest U.S. funds using LDI strategies are as follows:
Plan sponsor Total U.S.
DB assets
LDI assets
(in millions)
Raytheon Technologies $55,029 $23,065
United Parcel Service $52,952 $20,922
General Electric $61,316 $20,357
Kaiser Foundation Health Plan $65,479 $16,605
Caterpillar $17,087 $12,252
MetLife $10,365 $8,328
Prudential Financial $14,499 $7,833
Honeywell International $21,793 $7,803  
Exelon $20,764 $7,234
Corteva $17,224 $7,103
Merck & Co. $12,718 $4,790
National Technology and Engineering Solutions of Sandia $6,979 $4,662
Bayer $5,796 $4,152
American Airlines $14,308 $3,963
Deloitte $8,535 $3,940
Farmers Group $3,899 $3,249  
Morgan Stanley $3,102 $3,102
Target $4,583 $2,254
Ameren $5,751 $2,135  
Michelin North America $3,093 $2,100  
ViacomCBS $3,208 $2,024  
Eastman Kodak $3,959 $1,875  
MUFG Americas $5,062 $1,832  
Lockheed Martin $36,167 $1,751  
Thomson Reuters $2,388 $1,594  


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.



About the Author

Kevin McBride 07 Blog

Kevin McBride is a Commercial Litigation Attorney located in the fascinating city of Los Angeles, California, USA.

He is admitted into three California US District Courts (Central, Southern, and Northern), the US District Court for the District of Utah, the Ninth Circuit Court of Appeals, and the Federal Circuit Court of Appeals. McBride holds a BA degree in Economics from the University of Utah and a JD from the University of Utah College of Law, where he served on the Utah Law Review. He is a member of the Federalist Society and the Federal Bar Association.

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