investing for insurers: review and preview 2014
DESCRIPTION
SAA is consistently meeting and discussing issues with insurers, investment managers and others involved in the insurance investment process. What have been the common themes and challenges we hear? And how are various insurers approaching these key issues? What might we expect in the financial markets and economy over the next year? And, how might that impact insurers’ future plans? This session serves as the starting point for the days’ sessions, which are focused on helping you succeed in an increasingly challenging investment environment.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
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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."
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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
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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
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More Risk? When?
Cognitive Limitations and Biases
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Investing for Insurers
More Risk?
Diversification
Better Execution
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Diversification
Efficient Frontier
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Diversification
Efficient Frontier
Asset returns normal?
Correlations fixed?
All investors rational?
If everyone did it?
Which Strategic Asset Allocation Model is Best?
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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
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Better Execution
Active v Passive Investment
Efficient Markets Hypothesis v Irrational Exuberance
Nobel Contradiction: Fama v Shiller
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Better Execution
The Real Cost of Investment Management
Investment Management Fees Are (Much) Higher Than You Think
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Investing for Insurers
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Investing for Insurers
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Investing for Insurers
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More Risk?
Diversification
Better Execution