Four insurance portfolio allocation themes for 2022 and beyond

In today’s investment landscape, insurers are increasingly looking outside of traditional allocations to improve portfolio returns and returns on capital.

Insurance Investor promotional contentposted on Tuesday, January 18, 2022

This article was produced by M&G Investments as part of their valued industry partnership to Insurance Investor.

Navigating periods of higher uncertainty and volatility in the public markets has become the norm for many investors as the pandemic rumbles on, and both old and new worries move in and out of focus.

Regardless of the prevailing market and macro backdrop, for many investors their long-term investment objectives remain unchanged. We believe there continues to be a number of allocation opportunities spanning the public and private markets that are highly suitable for insurance balance sheets – helping insurers meet key needs and balance a range of unique requirements, while having the flexibility to invest in those areas of the market that offer good value.

The low yield environment is encouraging insurers to cast the net wider, beyond traditional fixed income asset classes and cash holdings, and optimise existing investment portfolios by making assets work harder to deliver against investment targets or by incorporating more exotic flavours of credit into their portfolios. Insurance investors are also considering the benefits of putting their capital to work in less liquid markets, like private debt, in the ongoing search for investment returns to meet long-term liabilities and add diversification of risk.

In this paper, we look at four portfolio allocation themes that look set to remain high on the agenda for insurance investors in 2022 and beyond:

In addition to these portfolio allocation approaches, we believe increased market uncertainty reinforces the importance of credit diversification and dynamically positioning portfolios for change – whatever shape or form ‘change’ may present itself over investment horizons – while ensuring alignment with long-term investment objectives. Therefore, consistent themes such as portfolio resilience and ESG and sustainability remain hugely important and will continue to have implications for insurance portfolios going forward.

 

 

 

For Investment Professionals only. This article reflects M&G’s present opinions reflecting current market conditions. They are subject to change without notice and involve a number of assumptions which may not prove valid. Past performance is not a guide to future performance. The distribution of this article does not constitute an offer or solicitation. It has been written for informational and educational purposes only and should not be considered as investment advice or as a recommendation of any security, strategy or investment product. Reference in this document to individual companies is included solely for the purpose of illustration and should not be construed as a recommendation to buy or sell the same. Information given in this document has been obtained from, or based upon, sources believed by us to be reliable and accurate although M&G does not accept liability for the accuracy of the contents. The services and products provided by M&G Investment Management Limited are available only to investors who come within the category of the Professional Client as defined in the Financial Conduct Authority’s Handbook. Issued by M&G Investment Management Limited (unless stated otherwise), registered in England and Wales under number 936683 with its registered office at 10 Fenchurch Avenue, London EC3M 5AG. M&G Investment Management Limited is authorised and regulated by the Financial Conduct Authority.

 

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