Investing in Alternative Fixed Income for Insurance Asset Owners

Presented by

Ajeet Manjrekar, PSolve; Etienne Comon, Goldman Sachs Asset Management; Michael Craig, Invesco Fixed Income; Martin Hurst, IP

About this talk

This is the second in a series of three webcasts looking at Solvency II from the point of view of the insurance company CIO. DETAILED AGENDA Introduction Rates are low, spreads are tight, and Solvency II is constraining the ability of insurers to pursue the credit investment strategies employed in the past (such as securitisations) Economic backdrop Where are we in the credit cycle, and what it means for the most attractive maturity segments on the credit curve, sector biases, and preference for strong covenants and/or senior secured loans What strategies work best under Solvency II Outright loans tend to be more attractive than securitisations Short-dated credit is more attractive than long-dated credit Sub-investment grade can be attractive ALM perspective For life companies, duration management is key. Alternative FI (e.g. loans) often bear a floating rate, which needs to be swapped to match liabilities One comment about the matching adjustment for annuity writers Brief review of the main ‘alternative credit’ markets: (with a brief comment about their attractiveness) Corporate loans – senior and mezzanine Real estate loans Infrastructure debt How can insurers invest? Funds vs. direct holdings What do insurers need to ensure compliance with Solvency II (reporting), and capital efficiency?

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