Commitment Driven Investing

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Commitment Driven Investing (CDI) is a cost-risk management framework designed for the optimization of the process of funding financial commitments for individual and institutional investors. The primary objective of the framework is to generate optimal asset allocation and contribution strategies for investors with financial commitment to fund (e.g. DC and DB plans, foundations and endowments). In particular, the framework generates Nash equilibrium optimal glide paths that maximize investors’ standard of living in retirement, which is perfectly suited for the design of target date funds. 

 The CDI framework is designed to take care of the best interests of the stakeholders of financial commitments – to minimize the riskiness and cost of funding the commitments as well as maximize feasible commitments. The framework optimizes the relationships between the components of the funding triangle “Commitment-Cost-Risk.” The framework generates efficient investment strategies that provide optimal trade-offs between an investor’s commitments, the risks the investor is willing to take and the contributions that the investor is willing to make. 

For a short introduction to the basics of CDI, see Commitment Driven Investing: A Foreword.

For a more detailed introduction to CDI, see Commitment Driven Investing: An Introduction.

For a description of the essential elements of CDI, see Commitment Driven Investing: The Essentials.

For a comparison between CDI and LDI (Liability Driven Investing), see LDI vs. CDI: Bitter Foes or Best Friends? 

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