The following excerpt is from a January 18, 2008 article (“LDI Strategy that is Liable to Word?”) by Penny Green, Chief Executive of the SAUL Trustee Company (a U.K. that advises on pension management) and deals with liability-driven strategies:
“.there is no one asset class that precisely matches a plan's liabilities. It is the case that bonds provide a cash flow that can be used to meet the cash flows out of a pension plan. But so do equities – it is just that the cash flows from equities (dividends) cannot be guaranteed. However, bonds do not cover longevity risk or salary inflation, so bonds are not a perfect match – but neither do equities. In fact, there is no asset class at present that matches longevity risk or salary inflation. This is the trustee's dilemma that LDI strategies are supposed to resolve.”
Explain why you agree or disagree with this viewpoint.