Persistently low interest rates are motivating insurers to diversify beyond fixed income into higher-return asset classes, including real estate, high-yield and emerging-market debt, and invest more in their risk management infrastructure, according to “Seeking Return in an Adverse Environment,” a survey of chief investment officers from KRC Research, sponsored by Goldman Sachs Asset Management (GSAM).
“Between low rates, a changing regulatory environment and significant market volatility, it is clearly challenging for insurers to produce strong risk-adjusted returns,” said Michael Siegel, GSAM’s global head of insurance asset management. “Our study shows that chief investment officers are addressing the adverse investment climate by rethinking asset allocation, and in many cases, diversifying into new asset classes while also enhancing their risk management systems.”
The survey was based on the investment sentiment of chief investment officers and senior investment-decision makers at 152 insurers, representing $3.8 trillion in invested assets.
Key findings of the survey include:
More than a quarter of respondents in the Americas and EMEA anticipate that deflation will be a concern in the next year. More than half of respondents across all markets expect inflation risk will be a concern in the next two to three years.
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