[Verse 1]
When pension funds collect their dues today
But payouts wait for decades down the line
There's a mismatch brewing in the fray
Between the cash that flows and future spine
LDI flips the script on portfolio design
Match duration, hedge the interest rate decline
[Chorus]
Liability-Driven means we build the bridge
From promises made to payments due
Duration matching at the rigid ridge
Where bonds and obligations rendezvous
Don't chase returns that vanish in the night
LDI keeps future payouts in our sight
[Verse 2]
Pension manager Sarah learns the trade
When rates drop low her liabilities soar
The present value makes her plans afraid
Sixty billion jumps to eighty-four
She needs assets that move the exact same way
Long bonds that gain when rates decay
[Chorus]
Liability-Driven means we build the bridge
From promises made to payments due
Duration matching at the rigid ridge
Where bonds and obligations rendezvous
Don't chase returns that vanish in the night
LDI keeps future payouts in our sight
[Bridge]
Immunization locks the funding ratio tight
When interest shifts both sides take equal flight
ALM means Asset Liability Management's grip
Keeps the pension ship from capsizing on this trip
[Verse 3]
Split the portfolio into tranches clean
Matching bucket holds the liability hedge
Growth bucket chases alpha in between
But never gambles at the matching edge
Retirees depend on promises kept
LDI ensures no pensioner has wept
[Chorus]
Liability-Driven means we build the bridge
From promises made to payments due
Duration matching at the rigid ridge
Where bonds and obligations rendezvous
Don't chase returns that vanish in the night
LDI keeps future payouts in our sight
[Outro]
When obligations drive investment choice
The funded status finds its steady voice