Asset diversification climbing the agenda: BlackRock

October 8 2019 by InsuranceAsia News Staff

Despite foreboding economic and political headwinds, 78% of global senior executives remain positive about the short-term investment outlook and 56% don’t expect a global recession coming before 2022, according to new research from BlackRock.

Despite their optimistic outlook, Asia Pacific insurers’ allocation to risk has been reduced in 2019 compared with last year – in part as a result of the evolving regulatory landscape.

The survey highlights increased caution and a desire to strengthen portfolio resilience through greater diversification. This has led to continued interest in less correlated private market opportunities, with 60% of respondents planning to increase allocations to the asset class in the next three years.

Kimberly Kim, head of BlackRock’s financial institutions group for Asia Pacific, commented: “Overall sentiment remains positive amongst Asia Pacific insurers suggesting they are positioned appropriately despite increasingly lower rates and higher volatility. On the other hand, we do see greater caution and growing recognition of the importance of holistic portfolio construction, and a continued shift into less correlated private markets.”

Kim added: “On average, global insurers expect to increase their private market allocations as a proportion of their total portfolio from 6.6% to 8.5% over the next three years. This trend is even more pronounced in Asia, with a clear preference for income generating private market assets.”

A large majority (83%) of insurers agree that it is still possible to generate alpha in fixed income, primarily through interest rate, credit and liquidity risk exposures, but are doing so with a greater emphasis on resilience.

Meanwhile 67% are seeking to integrate sustainability considerations into their investment process, while around half (58%) of the Asia Pacific insurers have made enhancements to their ESG policy compared to a year ago.

However, over three quarters of all respondents still believe that integrating ESG entails compromising on other investment goals.

BlackRock’s eighth annual global survey, Re-engineering for resilience, questioned 360 senior market executives whose companies invest US$16 trillion of assets. BlackRock’s Global Insurance Report was conducted in cooperation with the Economist Intelligence Unit (EIU).


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