Portfolio Construction

Words From the Wise: Martin Leibowitz Interview

Topics - Portfolio Construction Asset Allocation Strategic Asset Allocation

${ numberSection } ${ text }
Words From the Wise: Martin Leibowitz Interview

Martin Leibowitz, Managing Director in Equity Research at Morgan Stanley, recently sat down with Antti Ilmanen and Rodney N. Sullivan of AQR to discuss contemporary challenges in pension investing. This is the first in a series of "Words From the Wise" interviews to be published on AQR.com. 

Corporations in the U.S. have been shedding defined-benefit (DB) plans and moving toward defined-contribution (DC) plans. The remaining DB plans have been shifting gradually to liability-driven investing (LDI) for a host of reasons, including:

  • DB plans grew to be quite large relative to the sponsoring firm’s market value.
  • The attraction of reducing contributions by holding equity-oriented portfolios diminished as pension plans’ funded status became more volatile in the early 2000s.
  • Changing accounting regulations increased the magnitude and visibility of the sponsoring firm’s balance sheet volatility.

We explore “What’s next for DB plans?” and the conditions in which increasing or decreasing risk makes the most sense, with provocative insights.

We then turn to assessing the observed greater risk-taking by U.S. public pension plans, taking in some lessons from pension models implemented abroad, and asking how best to support a more secure retirement for individual investors.

We conclude with Marty’s thoughts on his research on asset allocation, duration targeting and equity valuations.

A fascinating discussion about how Marty came to Wall Street, what he discovered when he arrived there, as well as an exploration of his heroes is included in a special section.

Finally, for readers not well versed with the challenges of U.S. DB plans, Appendix A provides some terminology and key concepts as background for the discussion in the next few pages.



Published In

Alternative Investment Analyst Review

The views and opinions are that of the interviewee and are subject to change without notice. They are not necessarily the views of AQR Capital Management, LLC its affiliates, or its employees.


This material has been provided to you solely for information purposes and does not constitute an offer or solicitation of an offer, or any advice or recommendation, to purchase any securities or other financial instruments, and may not be construed as such. The investment strategy and themes discussed herein may be unsuitable for investors depending on their specific investment objectives and financial situation.


Information contained herein has been obtained from sources believed to be reliable, but not guaranteed. Forward-looking statements are not guarantees of future results. They involve risks, uncertainties and assumptions, there can be no assurance that actual results will not differ materially from expectations. Past performance is no guarantee of future results. No part of this material may be reproduced in any form, or referred to in any other publication, without express written permission from AQR.