| NEW YORK
NEW YORK May 5 Global insurance firms are
embracing risk in their portfolios this year, as they plan to
increase allocations to alternative investments such as private
equity and infrastructure debt, according to the third annual
survey by Goldman Sachs Asset Management released on Monday.
At the same time, insurers plan to reduce allocations to
cash and short-term instruments, as well as government and
The survey, conducted by GSAM with independent third party
research firm KRC Research, covered responses from 233 chief
investment officers (CIOs) and chief financial officers (CFOs)
representing insurers that invest more than $6 trillion in
global balance sheet assets.
More than a third, or 35 percent, of CIOs intend to increase
overall portfolio risk, while only 8 percent said they will
decrease risk, the Goldman survey showed.
Nearly half, or 48 percent said low yields are the greatest
portfolio risk this year. Insurers, as a result, are highly
optimistic about private equity returns over the next 12 months,
and continue to believe equities will outperform fixed-income
assets in 2014.
"Insurers remain focused on the search for return, but view
corporate bonds and public equities as either overvalued or
fairly valued," said Michael Siegel, GSAM's global head of
insurance asset management.
"This is driving CIOs to explore non-traditional asset
classes that can offer higher total return potential and
compensation for illiquidity."
GSAM's insurance asset management group currently oversees
$160 billion in assets.
Insurers are able to diversify investment portfolios and
allocate to non-traditional assets due to strong industry
About 29 percent of CIOs said they will raise holdings of
infrastructure debt, 28 percent will increase allocation to
private equity, 26 percent to commercial mortgage loans, and 26
percent to real estate.
Almost half of CIOs, meanwhile, believe investment-grade and
high-yield corporates are overvalued, while about 40 percent say
European and emerging market equities are undervalued. Only 7
percent think U.S. equities are undervalued.
More than one-quarter, or 28 percent of CIOs believe
shortening the duration of fixed-income portfolios is the best
strategy for managing risk in a rising rate environment.
(Editing by Chris Reese)