In this half-year outlook, the LDI investment team at Generali Asset Management* (Generali AM), part of Generali Investments platform, examines the following topics:

• Global steepening trends: LDI players across major developed markets remain cautious at the long end of the yield curve, as mirrored by the current market context featured by a steepening of yield curves.
• Ageing populations: Demographic shifts have the potential to drive a reshaping in asset allocation in the future, with ageing populations leading to a renewed interest in long-duration, income-generating, and inflation-protected assets, including annuities, real assets, and lifecycle funds.
• Opportunity to exploit yield enhancement strategies during range bound rates phases: Derivatives are playing an important role in enhancing LDI portfolio yield, as insurers use options and swaptions to tactically monetize range-bound phases while managing duration and reinvestment risk.

LDI PLAYERS ON A STRIKE TOWARDS THE LONG END OF THE CURVE

In the current market phase, one common feature within LDI players has been to adopt a cautious approach towards the long end of the curve. In fact, the magnitude of the global yield curve steepening trend seen across major developed markets, driven by monetary policy, growth, and fiscal sustainability, coupled with supply/demand, has proved to be a fundamental disincentive to buy long dated assets, and this trend is expected to continue.

You can now read the full whitepaper at the link below