Despite real investor need for exposure into alternatives, regulations remain a dominant hurdle for access to the asset class in Asia, chief investment officers from insurers claim.
This was a near-consensus view, as agreed by 93 percent of CIOs and investment staff from life, property and casualty, and reinsurance firms, according to a global survey by Natixis Investment Managers. Regulatory capital requirements, for example, limit access due to the illiquid nature of alternatives which has resulted in portfolios skewed towards low-yielding fixed income assets due to rate repression – an issue cited by 65 percent of APAC respondents as a top risk concern.
«The likes of private debt, private equity and other alternative investments provide a potential fix to underwhelming returns in the bond market, where insurers have traditionally turned to in the hope of finding stable returns to match their liabilities,» said Fabrice Chemouny, head of Asia Pacific at Natixis Investment Managers.
In addition to rates, 75 percent of regional respondents cited economic slowdown as a top concern for portfolios.
Global Demand
Globally, insurer demand was similarly high for alternatives with 75 percent stating that an allocation to the asset class was essential and 53 percent even using it as a fixed income replacement.
The persistent low-yield environment has resulted in increasing liabilities and widening duration mismatch for investors which has been a key driver for alternative demand. The Natixis survey of 200 CIOs and investment staff at insurers revealed that 75 percent of respondents were struggling to balance alpha generation with the cost of capital. Higher complexity involved with alternative management led two in three insurers to seek third party portfolio management solutions.
