Cash Flow & Liability Matching

We map liabilities (e.g., home purchase in 5 years) to dedicated sleeves using liability-driven investing (LDI), matching durations (e.g., 5-year bond ladders) to minimize reinvestment risk. Cash flows from coupons/principals align precisely, using high-quality assets like TIPS (inflation-protected) or CDs for predictability.
Techniques include immunization (matching Macaulay duration to liability timing) and stress testing for rate changes (convexity adjustments for non-parallel shifts). This reduces forced sales in downturns, with buffers for inflation (3% assumed). For pensions, we integrate with ALM, targeting surplus for growth assets.
Projections use Monte Carlo for scenarios, ensuring 95% funding probability. Annual rebalancing maintains alignment, incorporating 2026 outlooks like moderating inflation.