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Cash Flow-Driven Investing

Cash flow-driven (CDI) investing is an investment approach focused on delivering a consistent and reliable stream of income in an effort to meet the near-term obligations of an organization. CDI is commonly presented as an investment solution for corporate defined benefit plans that make regular benefit payments, but any organization with regular cash flow requirements could potentially benefit from a liability-aware investment approach. 

 

We believe four key factors impact the success of a cash flow-driven investment solution: 

  • Multi-sector opportunity set with an emphasis on credit. 
  • Dynamic investment framework - consistently applied with a focus on risk management. 
  • Precise matching of assets to liabilities. 
  • Highly customized, client-dependent approach developed with close collaboration. 

Potential benefits of a cash flow-driven investment solution

Obligations are funded with pre-defined assets

With an investment strategy geared toward matching or exceeding more immediate obligations, programs may be able to avoid the need to raise funds sporadically and at inopportune times to meet near-term cash flow needs.

Funding status and asset growth are not hindered by frequent redemptions

Assets are invested with a purpose. By using a cash flow-driven investment strategy to support short-term obligations, other program assets may be available to improve or maintain a program's funding.

INVESTMENT COMMITTEES ARE ABLE TO FOCUS ON STRATEGIC OBJECTIVES

Plan sponsors often struggle to find the time and expertise to oversee the investment strategy of their plan.

More efficient deployment of new contributions

With current cash flow needs matched, new contributions can be invested to help support the long-term objectives and future liabilities.

Different cash flow needs require tailored cash flow solutions

 

Cash flow-driven investing can be utilized by a wide variety of investor types because it is highly customized. Each CDI portfolio can be tailored to an organization's specific circumstances—designing a customized asset mix, duration profile, and overall time horizon that seeks to meet the unique needs of each program.

 


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