Goldman Sachs Asset Management’s (GSAM) latest insurance survey, “Too Much Capital, Too Little Return,” reveals that while insurers believe the industry is well capitalized, finding attractive investments is challenging in an investment environment characterized by negative yields, tight spreads, and high equity prices.
In response, according to the survey, insurers will increase allocations to less liquid, private assets. They intend to increase allocations to commercial mortgage loans, infrastructure debt, private equity and middle market loans. To fund these investments, insurers will decrease allocations to highly liquid assets such as cash and short-term instruments and government and agency debt.
“Insurers are concentrating on finding new investment opportunities which are sparse because yields still remain at low levels, and insurers are not anticipating a meaningful increase in rates this year,” said Michael Siegel, GSAM’s Global Head of Insurance Asset Management. “Nonetheless, one-third of insurers globally intend to increase overall portfolio risk. Insurers believe equity asset classes will outperform credit assets and they are looking to increase allocations to less liquid, private asset classes.”
Insurers predict that the equity asset classes will outperform credit asset classes and they anticipate that the highest returning asset classes will be private equity, US equities, and European equities this year. “Insurers believe equity asset classes will outperform credit assets and they are looking to increase allocations to less liquid, private asset classes,” said Mr. Siegel.
GSAM Insurance Asset Management Survey partnered with KRC Research, an independent third party research firm, to conduct the 2015 survey from February 3 to 25, 2015. The global online survey received 267 responses, including 208 CIOs, 48 CFOs and 11 individuals who serve as both CIO and CFO. The respondent base included life, property & casualty, multi-line, reinsurance, and health insurers. In total, respondents had over $6 trillion in global balance sheet assets.
Goldman Sachs Asset Management is the asset management arm of The Goldman Sachs Group (NYSE: GS) and had $1.1 trillion in assets under supervision as of March 31, 2015.
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© 2015 PEPD • Private Equity’s Leading News Magazine • 4-23-15