investing for insurers: review and preview 2014
TRANSCRIPT
Alton R. Cogert, CFA, CPA, CAIA, CGMA
President and Chief Executive Officer
March 13, 2014
Insurance Investment Forum XIV
Investing for Insurers:
Review and Preview
Investing for Insurers
2
Investing for Insurers
I want you to go to the window, open it, stick your head out and yell:
"I'm as mad as hell, and I'm not going to take this anymore."
3
Investing for Insurers
More Risk?
Diversification
Better Execution
4
More Risk?
How?
Interest Rate
Credit
Liquidity
Market
Liquidity and Portfolio Choice: A Unified Approach
Time Diversification and Horizon-Based Asset Allocations
5
More Risk?
Where?
Bank Loans (aka Leveraged Loans)
Emerging Mkt Debt
High Yield Bonds
Dividend Focused Equities
Various Equity Capitalizations
Real Estate (REITs)
Int’l Equity
Convertibles
MLP’s
6
More Risk?
Where?
Bank Loans
Dividend Equity
Small Cap Growth
Convertibles
EM Debt
PE (Fund of Funds)
Hedge Funds
Infrastructure
Global multi-asset/TAA
Eager, Davis & Holmes, LLC Insurance Asset Tracker, Q4, 2013
7
More Risk?
When?
Tactical v Strategic
Mean Reversion
Cognitive Limitations and Biases
8
More Risk? When?
Cognitive Limitations and Biases
Making Better (Investment) Decisions
9
More Risk? When?
Cognitive Limitations and Biases
10
More Risk? When?
Cognitive Limitations and Biases
11
More Risk? When?
Cognitive Limitations and Biases
12
More Risk? When?
Cognitive Limitations and Biases
13
More Risk? When?
Cognitive Limitations and Biases
14
More Risk? When?
Cognitive Limitations and Biases
15
More Risk? When?
Cognitive Limitations and Biases
16
Investing for Insurers
More Risk?
Diversification
Better Execution
17
Diversification
Efficient Frontier
18
Diversification
Efficient Frontier
Asset returns normal?
Correlations fixed?
All investors rational?
If everyone did it?
Which Strategic Asset Allocation Model is Best?
19
Diversification
“Modified” Efficient Frontier
Regime shifts
Regime Shifts: Implications for Dynamic Strategies
20
Diversification
“Modified” Efficient Frontier
Factor Based Investing
Risk Parity Portfolios
Diversification: Still the Only “Free Lunch”?
21
Investing for Insurers
More Risk?
Diversification
Better Execution
22
Better Execution
Active v Passive Investment
Efficient Markets Hypothesis v Irrational Exuberance
Nobel Contradiction: Fama v Shiller
23
Better Execution
The Real Cost of Investment Management
Investment Management Fees Are (Much) Higher Than You Think
24
Investing for Insurers
25
Investing for Insurers
26
Investing for Insurers
27
More Risk?
Diversification
Better Execution