The Pension Window of Opportunity for Liability-Driven Investing

A window of opportunity has opened for pension plans to reduce interest rate risk. Higher bond yields have boosted funded status to the highest point this century. This environment allows plans to de-risk on more attractive terms.

Many plans still appear underhedged despite improved funding. Over 40% held less than 50% in fixed income in 2025. This suggests funded status hasn't always translated into adequate liability hedging.

Plans should reassess allocations against funded status and objectives. Active fixed income can pursue excess returns within a liability-driven investment framework. This offers a path to retain liquidity and return potential while de-risking.