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There is quite a bit of confusion as to what LDI is and the EDHEC study does not seem to have contributed to a better understanding. On the contrary. I am concentrating on the concept of matching the liability and bond portfolio duration (duration matching) which is sheer nonsense. First, it assumes that the whole bond portfolio is invested in bonds, or that the rest of the portfolio has matched the duration of the liabilities already, otherwise, such matching is an empty gesture towards theoreticians. Second, it ignores that the liabilities of an open fund have a duration of 15 to 25 years, so that it is physically impossible to match that duration in the bond market. If 40% of the respondents were able to pull this off anyway, there are some severe definitional problems here. If this impossible task is indeed "the first step towards LDI" it is no wonder that pension funds don't implement LDI.

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