This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.
| less than a minute read

US Insurers Turn Against Hedge Fund Strategies

A new report by analytics and ratings firm AM Best casts light on what appears to be a growing antipathy by US insurers against hedge fund strategies.

Although European insurers have arguably never embraced hedge funds, there are some commonalities with developments in insurance investing in Europe: Hedge funds need to put clear, blue water between their performance and that offered by other investment sources, in order to justify their more punitive capital charging regime. Under most rule books, charges for hedge fund investing are not dissimilar to those incurred for private equity investments - a class which has generally offered better returns for some years but which is no longer necessarily constrained by a liquidity straitjacket.  Add to that an uptick in EMD and HY based, short duration strategies adopted by insurers - categories in which the relative value argument to incur an additional charge is proven - the low-cost passives revolution and iterative increases in private debt investing by the longest duration insurers on both sides of the Atlantic and the outflow for hedgies is perhaps unsurprising.  The Wall St journal takes up the story...

Wall Street money managers are having problems hanging onto insurance companies as customers. American International Group Inc. and MetLife Inc. pulled more than $700 million from hedge funds in the first quarter of 2018, according to filings. That followed billions of dollars in withdrawals over the previous two years. Net hedge-fund outflows from all U.S insurers amounted to $8.7 billion in 2016 and 2017, according to a new report from ratings firm A.M. Best Co. Total insurance-industry assets held by hedge funds were $16.4 billion at the end of 2017, down 8.5% from the same time a year earlier. Six other insurers beyond AIG and MetLife also reduced their holdings in 2017, according to A.M. Best. Twelve insurers, including Prudential Financial added to their investments, but those inflows were collectively smaller than the industry’s outflows.

Tags

recruitment, alm, insurance invesment, ldi, longevity, solvency ii, life insurance, executive search, insurance solutions

Please contact us for further information