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September 2012 Bermuda Re/insurance
“We aim to bridge the gap between clever ideas and regulatory reality. There is no shortage of clever investment ideas out there, but there is a real shortage of ideas that actually work for an insurance company.”
I think we have been good at identifying reinsurance client concerns and working with our investment teams to provide solutions. A good example was the disenchantment expressed by many with index plus or minus a few basis point returns by benchmark-hugging managers. We built a US dollar fixed income proposition for reinsurers with the twin objectives of ‘maximising return’ and ‘focusing on capital preservation’ that now has a strong track record. Not every manager can, or indeed wants to, offer this kind of strategy.
You are well known as a UK asset manager. How important are the US and Bermuda to you?
The answer is ‘very important’. Schroders is a global asset manager—in fact two thirds of our revenue comes from outside the UK—and we have a well resourced US investment operation with a long established strength in core US fixed income that is relevant for both the US and Bermuda.
Our US-based team has delivered impressive risk-adjusted returns in our core US fixed income strategies, and this is an important calling-card for us.
We are also increasingly taking calls from US insurers looking to introduce diversifying, non-US fixed income components to their broader bond portfolios. We believe that we are very well positioned in this respect with excellent capability in global bond strategies and in specialist areas such as euro credit and emerging market debt. I expect our role as a supplier of this kind of specialist expertise to grow significantly.
Finally, Charles Matterson has relocated from the IAM team in London to New York, so that we can better engage with US and Bermudian clients. We understand that we are smaller than some of the established players, but we are approaching the market with fresh ideas and distinctive capabilities which make us interesting to talk to.
Is there a trend towards increased outsourcing of asset management by insurers? What do you see as the major opportunities for growth?
Insurance companies the world over are struggling to address the new market landscape of low interest rates, heightened volatility, and seismic regulatory change that is emerging from the flames of the financial crisis; as a firm we are very well resourced to meet these challenges. I see a hunger for new ideas, techniques and investment capabilities from all parts of the world and from all types of insurer: ‘local’ portfolios are looking for ‘global’ expertise for diversification; ‘core’ portfolios are looking for ‘specialist’ alpha sources; generally, clients are looking for ways of engineering improved risk and return outcomes.
The opportunity for asset managers to supply new investment capabilities to insurers looking to cast the net wider is clearly increasing. A good example would be emerging market corporate bond expertise, which you might want as a diversifier in a broader fixed income portfolio. We have boosted our capability in this area and I expect to see significant interest.
We see ourselves as well placed to help insurers access new Paul Forshaw, head of Schroders’ Insurance Asset Management
investment capabilities they do not have in-house. We have a broad range of investment capabilities, strong risk management and we are, crucially, developing an ‘insurance client culture’ within the firm, through our insurance asset management team.
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