Tim Antonelli, CFA, FRM, SCR, Insurance Strategist and Portfolio Manager, Wellington Management
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The investable asset universe for global insurers has evolved and proliferated rapidly and continues to do so. From new asset classes and security types to numerous implementation vehicles, keeping track of it all could easily be a full-time job. Within this vast universe resides a “galaxy” that is pretty large and eclectic in its own right: alternative investments. It’s an area that many investors (including some insurance companies) have historically taken a cautious stance on, but that has begun to change in recent years — an encouraging development, in our view.
One reason for the past skepticism was widespread confusion around the alternatives space. While traditional asset classes like equities and fixed income are familiar to and well understood by most investors, the alternatives bucket has chronically lacked a clear consensus, both in terms of the scope of the universe and what purpose it should serve in an investor’s strategic asset allocation. With that in mind, this paper aims to provide global insurers with a robust framework for how they might approach and navigate the alternative investments landscape. As prerequisites to using this framework, insurers should of course identify their own overall portfolio risk/return objectives and at least be open to the possibility that alternative investments can aid in the pursuit of those goals.
So how might insurers go about creating, implementing, and managing an effective alternative investments allocation? Please click the link below to read the white paper.