Dedication Strategy

AAA

DEFINITION of 'Dedication Strategy'

A method by which the anticipated returns on an investment portfolio are matched with estimated future liabilities. A dedication strategy is frequently used in pension funds and insurance company portfolio to ensure that future liabilities can be met. An institution, such as an insurance company, can estimate future liabilities and try to minimize its outlay to satisfy future liabilities through its anticipated investment earnings.


Also called portfolio dedication, cash flow matching and structured portfolio strategy.

INVESTOPEDIA EXPLAINS 'Dedication Strategy'

A dedication strategy involves cash flow matching so that investment earnings will provide funds for anticipated future capital outlays. Pension funds and insurance companies can fairly accurately predict future liabilities, which tend to be large. Their portfolios typically include low-risk, investment-grade securities, such as medium- or high-rated bonds, that allow for fairly predictable earnings to match to projected future capital outlays.

RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Bond Rating

    A grade given to bonds that indicates their credit quality. Private ...
  3. Investment Grade

    A rating that indicates that a municipal or corporate bond has ...
  4. Liability

    A company's legal debts or obligations that arise during the ...
  5. Matching Strategy

    The acquisition of investments whose payouts will coincide with ...
  6. Hedge Fund

    An aggressively managed portfolio of investments that uses leveraged, ...
Related Articles
  1. Investing Basics

    Portfolio Management Pays Off In A Tough Market

    A clear rebalancing strategy is a critical component of portfolio management, particularly in tough economic times.
  2. Mutual Funds & ETFs

    4 Strategies For Managing A Portfolio Of Mutual Funds

    Discover some common strategies to devise a plan and maintain your holdings to reflect it.
  3. Investing Basics

    Introduction To Multi-Discipline Accounts

    You get multiple managers, affordable diversification, customization and consolidated reporting all under one roof.
  4. Professionals

    The Workings Of Equity Portfolio Management

    Achieve analytical efficiency by applying your evaluation to a key set of stocks.
  5. Investing

    What’s The Essence Of Smart Beta In Fixed Income?

    In essence, smart beta strategies seek to re-write index rules to capture factors, such as value, quality, or low volatility, in their stock portfolios.
  6. Fundamental Analysis

    The Future of Big Pharma Stocks

    A look at the future health of big pharma stocks.
  7. Entrepreneurship

    New Tech Capitals Emerging In Various U.S. States

    While Silicon Valley has long been recognized as the home of tech giants, an increasing number of cities around the country are attracting tech startups.
  8. Investing

    How To Invest Outside Your Comfort Zone?

    Sometimes, when it comes to investing, we have to step outside of our comfort zone and use investment tools to express a market view or specific outcome.
  9. Investing

    How Do Millennial Women Invest?

    The theme for Women’s History Month is “Make it Happen”, and that is exactly what millennial women are doing when it comes to their investments.
  10. Options & Futures

    Feed Your Appetite For Chipotle Stock with Options

    Chipotle's stock may be out of the average person's price range, but options in-the-money call options offer a way to invest in the company.

You May Also Like

Hot Definitions
  1. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  2. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  3. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  4. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  5. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  6. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
Trading Center