Schroders Institutional Investor Study 2018
Insurance investors’ return expectations plummet amid heightened risk concerns
Insurance investors globally have seen their return expectations plummet as concerns over rising levels of equity market volatility and risk weigh on their portfolios, the Schroders Institutional Investor Study 2018, ‘An Insurance Focus’, has found.
The study* – which surveyed 157 insurance investors representing a total of $10 trillion in assets – found that two-fifths (40%) of investors expect their average annual returns to be less than 5% over the next five years, a stark increase on 22% of insurance investors a year ago.
Insurers’ confidence levels in achieving their desired returns have also slipped from 61% to just over half at 54%. At the same time, insurers’ average portfolio holding periods have also fallen, with those remaining invested for a full market cycle slipping from 14% to 10%.
In turn, their portfolio turnover has also increased, with insurers selling on average 19% of their portfolios each year, up on 13% a year ago.
Andreas Markwalder, CEO of Schroder Investment Management (Switzerland) AG:
“Global markets have enjoyed a great run in recent years, our survey shows that insurers are now growing wary which could indicate that this may be coming to an end.”
"The insurers we have surveyed are increasingly looking at bespoke risk-managed solutions and diversifying private assets in order to generate the returns they require with acceptable risk. Sustainability is also coming sharply into focus as a feature of our insurance clients’ investment requirements.”
Politics and world events were cited by 26% of insurers as the most pressing factor that could affect the performance of their portfolios, with 25% flagging higher interest rates and 23% a global economic slowdown.
In terms of specific investment issues, equity market volatility, interest rate risk and credit defaults were the three main market risks highlighted by insurers. Better risk-managed investment solutions were the innovation the majority of insurers (62%) would like to see more of over the next 12 months.
Insurers are expecting to increase their private asset allocations from 9% to 11% over the next 12 months with higher returns, diversification and better risk-management being the key motivations.
Almost three-quarters of insurers’ assets (73%) are currently actively-managed, the study found.
Furthermore, 73% of insurers expect the role of sustainable investing to become more important, echoing a wider shift in the investment space, with insurers now placing a greater emphasis on the sustainability focus of their investments compared with a year ago.
Paul Forshaw, Global Head of Insurance Asset Management, Schroders, said:
“The survey confirms the importance of asset managers having insurance-specific investment expertise to deliver the actively managed tailored solutions required to meet insurers’ increasingly sophisticated objectives.”
Please click here to view the full report.
The first part of the Schroders Institutional Investor Study 2018 was released in September. Focused on sustainability, it found that this remained a non-core investment consideration for institutional investors. It can be read here.
*This global study was commissioned for a second year by Schroders and undertaken by independent research agency, CoreData Research, studying institutional investors representing a variety of institutions, including pension funds, foundations, endowments and sovereign wealth funds. The research was carried out via an extensive global survey during June 2018. The 650 institutional respondents were split as follows: 175 in North America, 250 in Europe, 175 in Asia and 50 in Latin America. Respondents were sourced from 15 different countries.
- End -
For further information, please contact: Ralph Spillmann, Managing Partner / Communicators / ralph.spillmann@communicators.ch / +41 (0) 44 455 56 51
Kathrin Aeschlimann, Marketing Specialist Schroder Investment Management (Switzerland) AG / kathrin.aeschlimann@schroders.com / +41 (0) 44 250 12 40
Note to Editors
For trade press only. To view the latest press releases from Schroders visit: http://ir.schroders.com/media
Schroders plc
Schroders is a global investment manager with more than 200 years’ experience of helping our clients meet their goals, fulfil their ambitions, and prepare for the future. Schroders currently manages CHF 589.2 billion (£449.4 billion) and employs over 4,600 people in across six continents.*
Schroders is listed on the London Stock Exchange and is a member of the FTSE 100. It also remains in part a family business, with almost half of voting shares held by the Schroder family. Independence and long-term thinking are central to our business philosophy – values reflected in our steady ownership structure.
At home in Switzerland for over half a century – here we have three businesses; each with its own emphasis, all with the same clear focus on meeting clients’ needs and adapting to a changing world:
- Schroder Investment Management (Switzerland) AG is our investment management business. It offers institutional and private investors a wide range of Swiss-domestic and foreign-domiciled funds, along with bespoke investment mandates.
- Schroder & Co Bank AG provides bespoke Wealth Management services to private individuals, family offices, external asset managers and charities.
- Schroder Adveq is a leading private equity asset manager serving institutional investors, namely pension funds, insurance companies and others throughout the world.
Our combined Swiss team is made up of around 400 people. Together they are responsible for a total of CHF 78.8 billion (£ 60.1 billion)*.
Find out more about Schroders at www.schroders.com
*as at 30 June 2018
Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. The content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.