TY - JOUR T1 - LDI: <em>Reducing Downside Risk with Global Bonds</em> JF - The Journal of Investing SP - 128 LP - 135 DO - 10.3905/joi.2012.21.2.128 VL - 21 IS - 2 AU - Alison M. Martier AU - Ivan Rudolph-Shabinsky AU - Erin Bigley Y1 - 2012/05/31 UR - https://pm-research.com/content/21/2/128.abstract N2 - Most LDI portfolios utilize long-maturity domestic bonds, with the assumption that they are the best match for longterm liabilities, such as pension obligations.This article investigates whether the addition of currency-hedged global bonds can improve the performance of a LDI portfolio. In the major bond markets studied, the authors found that from the late 1980s through 2011, a portfolio of currencyhedged global long-term bonds captured most of the upside return of domestic long-term bonds but less than half of the downside return. Hedged global bond returns were highly correlated with domestic bond returns, but with fewer extremes and a higher return–risk ratio than domestic bonds.TOPICS: Fixed-income portfolio management, global, pension funds ER -