Staying afloat: A framework for public pensions navigating a liquidity squeeze
Managing public pension plans in turbulent markets can be a challenge, especially when funding levels and cash flow pressures dictate tough decisions. In some cases, plans are forced to sell assets, potentially locking in losses and delaying financial recovery.
In this white paper, we introduce an investment framework to help address these challenges that centers on setting aside a liquid portion of the portfolio. With this liquidity sleeve, plans can cover immediate cash flow needs while shielding the rest of their investments from the pressure of required payments. This strategy can help protect plan participants, even during times of extreme market stress.
The liquidity sleeve can be built in various ways, with trade-offs inherent in each construction.
- Cash portfolio
- Treasury portfolio
- Cash flow matching portfolio
- Single asset class replication to free up capital and top up liquidity sleeve
- Full strategic asset allocation replication within liquidity sleeve
- Portable alpha for “Liquidity Plus"
Download the full whitepaper
Learn more about the investment markets, timely topics and our firm capabilities in this whitepaper.
Additional insights
Collectively forecasted, never arrived
Investment Outlook | Q1 2024
Like driving on ice, the trick to surviving 2024 may be not over committing in one direction. Staying flexible at the beginning of the year should allow for more insightful decisions down the road.
Rethinking overlay manager diversification
LDI
At LGIM America, we believe overlay manager diversification is likely inefficient and creates uncompensated risks. Using multiple overlay managers can result in increased costs, collateral inefficiency and higher governance burdens.
This material is intended to provide only general educational information and market commentary. Views and opinions expressed herein are as of the date set forth above and may change based on market and other conditions. The material contained here is confidential and intended for the person to whom it has been delivered and may not be reproduced or distributed. The material is for informational purposes only and is not intended as a solicitation to buy or sell any securities or other financial instrument or to provide any investment advice or service. L&G – Asset Management, America does not guarantee the timeliness, sequence, accuracy or completeness of information included. Past performance should not be taken as an indication or guarantee of future performance and no representation, express or implied, is made regarding future performance.
Unless otherwise stated, references herein to "L&G" and “L&G – Asset Management” refer to the global asset management business of Legal & General Group plc. that includes Legal & General Investment Management Ltd. (a U.K. FCA authorized adviser), Legal & General Investment Management America, Inc. (a U.S. SEC registered investment adviser) Legal & General Investment Management Asia Limited (a Hong Kong SFC registered adviser), Legal & General Investment Management Japan KK (licensed by the FAS in Japan), and LGIM Singapore Pte. Ltd. (licensed by the MAS in Singapore).
© 2026. All rights reserved. No part of this publication may be re-produced or transmitted in any form or by any means, including photocopying and recording, without the written permission of the publishers.