(July 11, 2013) - The well-established portfolio management trends of investment outsourcing and alternatives may be drifting towards the insurance industry.
More than three-quarters (81%) of the 307 insurance executives surveyed for State Street's latest sector report were considering increasing their allocation to alternative investment strategies, in the short or long term. Nearly half (49%) said they were evaluating for action within the next 12 months.
"With policy orders on the life side for which the yield is above 3%, and when 10-year bonds are below 2%, it is very difficult," AXA Investment Management CIO Laurent Clamagirand told State Street. "When yields were big enough, we had a large enough source of assets not to bother. Now we need to diversify big time."
Clamagirand estimated that between 20% and 25% of AXA's new investments would go into nontraditional assets this year. To make room in the insurance giant's risk budget, he reported reducing the already-modest equity holdings.
As survey respondents considered these new asset classes, 67% said they were looking at increasing the portion of their firm's general account under external management. Still, upping the portion of outsourced assets was not synonymous with hiring more managers: half of the respondents to the April 2013 survey were considering reducing their total number of outside relationships.
The survey garnered responses from insurance executives and senior managers in the Americas (26%), EMEA regions (38%), and Asia/Pacific (36%). Industry subsectors represented include life insurance (53%), health (9%), and reinsurance (7%).