Invesco's head of EMEA insurance distribution and strategy, Richard Glenn, explains why alternative investments really matter for insurers given current market conditions. He also discusses Invesco's deep expertise in this area
Why should insurers come to Invesco for expertise in alternative investments?
Invesco offers fully customised, comprehensive, outcome-oriented portfolios powered by Invesco Vision. This is a proprietary asset allocation and analytics platform that provides a single point of access to a rich pipeline of high-quality investment strategies.
The platform also features the ability to offer competitive pricing, using a combination of our deep third-party relationships and in-house capabilities within our alternative investment solutions suite.
A distinguishing feature of the Invesco alternative investment solutions platform is its ability to address a variety of insurer needs through internal investment capabilities and external partnerships. Leveraging Invesco's expertise in alternatives brings particular strengths in real estate, bank loans and direct lending - and the skills of leading boutique firms in private markets.
What is your outlook for the alternatives market in 2022?
Some alternative assets performed very well in 2021, especially private equity. While 2022 may show some uncertainty, due to slower global growth, inflation and higher valuations, there should be optimism across alternative and private market asset classes.
Our alternatives platform invests in and advises on allocations to a variety of private markets. By utilising our expertise in this space, and the vast dataset available to us, we are well positioned to analyse across alternatives. We look at a combination of qualitative and quantitative measures including valuations and fundamentals to determine the level of attractiveness.
Tactically, we are overweight private credit and real assets and positive on real estate and infrastructure. Overall, we are optimistic and believe there are still opportunities in the riskier portions of the market.
What challenges do insurers face in the current investment environment?
It has been well documented that if rates remain at current levels, it's a challenge for insurers to back their liabilities utilising only the public corporate bond markets. This is accelerating the trend towards alternatives.
The challenge for insurers then becomes how to efficiently access the multitude of private asset strategies. When implementing alternatives, all but the very largest investors often lack the staffing, technology and infrastructure which inhibits optimal implementation.
For insurers to invest in new alternative asset classes, we believe it requires close partnership with experienced investment management professionals. Invesco's value proposition implements a flexible, multi-manager approach designed to complement and extend the internal capabilities.
Will alternatives become increasingly important for insurers' portfolios this year?
As market uncertainty persists and capital market return assumptions remain muted across traditional asset classes, Invesco believe alternatives will continue to play an increasingly important role in insurance portfolios.
We've seen this trend play out in higher quality alternative assets for UK matching adjustment portfolios. In 2022, I expect we will see materially increased allocation to alternative assets in UK with-profits, European participating portfolios, and interestingly, insurers' surplus assets. We believe adding alternatives here can enhance the risk and capital adjusted efficiency of the portfolios.
There is now an amazingly diverse range of private asset strategies for insurers to consider.
Our suggestion for alternatives is for insurers to investigate a diversified suite of alternative investment strategies focused on the key, thematic objectives of income generation and capital appreciation.
How can the Invesco Vision platform help insurers with alternatives?
Invesco Vision can address the main challenges of portfolio construction. It offers a variety of portfolio optimisation methods to address issues including insurers' cashflow and liability matching, as well as regulatory constraints, such as Solvency ll and Bermudian or US capital requirements.
Important Information
The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.
Where individuals or the business have expressed opinions, they are based on current market conditions, they may differ from those of other investment professionals and are subject to change without notice.
