[Verse 1] Pension funds collect the working years Monthly contributions building towers high But future promises create the fears When assets can't match what they need to buy The surplus shrinks when markets take a dive Obligations growing while returns decline [Chorus] Asset Liability Matching keeps the balance tight Duration hedging makes the interest rates align Surplus risk can vanish overnight LDI strategies by design Match the cash flows, match the time Keep those pension promises in line [Verse 2] Liability-driven investing leads the way Bond portfolios mirror pension debt When interest rates decide to swing and sway Both sides move together, safer bet Immunization locks the funding ratio Deficits dissolve when durations match [Chorus] Asset Liability Matching keeps the balance tight Duration hedging makes the interest rates align Surplus risk can vanish overnight LDI strategies by design Match the cash flows, match the time Keep those pension promises in line [Bridge] Longevity risk extends the payment years Inflation swaps protect the purchasing power Credit spreads and equity market tears Can devastate in just a single hour Diversification spreads the danger wide Dynamic hedging adjusts as time goes by [Final Chorus] Asset Liability Matching keeps the balance tight Duration hedging makes the interest rates align Surplus risk can vanish overnight LDI strategies by design Match the cash flows, match the time Keep those pension promises in line [Outro] Retirees depend on actuarial care Mathematical precision everywhere
← Pension Fund Basics and Funded Status | Target-Date Funds and Glide Paths →