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Cashflow Driven Investing for Maturing UK DB Schemes

The Ins and Outs of Cashflow Driven Investing

Cashflow Driven Investing (CDI) is an investment approach designed to increase the certainty of meeting liability cashflows. Although not a new idea for pension schemes, this approach has become increasingly relevant as more schemes become cashflow negative.

Below we have gathered some of the top whitepapers on Cashflow Driven Investing, uncovering ways in which UK DB pension schemes can both increase their cashflow awareness and protect against the unexpected.

wallet cashflow CDI


Cash-Flow Driven Investing, Private Credit and Real Assets (BNP Paribas AM, Jul 2018)
Institutional investors in the UK and globally are considering alternative approaches to cash-flow driven investment, and are increasingly opting for illiquid instruments and strategy sets over the traditional 60:40 portfolio structure.

DB Pension Schemes: Raising cashflow awareness (LGIM, 2018)
(For compliance reasons, this paper is not accessible in the United States and Canada)
Over half of global DB pension schemes are either cashflow negative or headed that way. LGIM discusses how schemes can better manage cashflows in this 4-page report.

Cashflow Driven Investment Assets (Aon Hewitt, Nov 2017)
Cashflow driven investments may make a good or reasonable investment regardless of the cashflows for some schemes - either for overall risk/return reasons or as a way of making the LDI assets work hard.

Cash-flow generating real assets - the next big thing for pension schemes? (Willis Towers Watson, 2017)
Income provided by traditional assets is inadequate. Here, Duncan Hale of Willis Towers Watson makes the case for pension fund investment in real assets to improve the health of cash flows.

Cashflow Driven Investment - Made Simple for UK Pension Schemes (PLSA, 2018)
This PLSA guide defines CDI, explaining the building blocks of cashflow driven investment, the rationale for utilising it, and whom it is appropriate for.

Cashflow Driven Investing for DB Pension Schemes (Alpha Real Capital, 2017)
The path to ‘self-sufficiency’ for defined benefit pension schemes was never expected to be smooth but few trustees could have predicted the journey pension scheme funding levels have taken since the global financial crisis.

Cashflow driven investment or clever distribution investing (Schroders, 2017)
UK DB pension funds are looking towards cashflow driven investment in order to manage risk and meet their payment needs. This paper explores CDI in more detail.

Cashflow Awareness: Transfers out (LGIM, 2018)
(For compliance reasons, this paper is not accessible in the United States and Canada)
Managing cashflows effectively has become increasingly important for DB pension schemes. This report by LGIM considers the implications of transfers out of pension schemes in the short and long term and how schemes can best prepare.

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