The bank’s comprehensive survey of 152 of the world’s biggest insurers, which control almost $4 trillion worth of assets, shows that many are set to reshape their traditionally conservative asset allocation. The study finds the sector looking set to increase its holdings of less liquid investments such as high-yield bonds, emerging market debt and private equity.
To help fund the move, insurers plan their biggest portfolio reductions in cash and short-term instruments as well as European financial credit.
Jim O’Neill, chairman of Goldman Sachs Asset Management, said the survey “reflects the generally worrying views that tend to populate the minds of most Western investors, from whom the majority of responses came”. However, he added it provided evidence to suggest that “many investors simply have no choice [but] to reach for more risk given their own obligations and liability requirements”.
Low interest rates pose a particular headache for life insurers in the US and several markets in Europe, which offer relatively generous guaranteed returns to policyholders. As well as the greater interest in riskier assets, however, 81 per cent of the insurers questioned plan to increase or maintain their positions in US investment-grade corporates.
Meanwhile, stocks are unlikely to benefit strongly. Only 21 per cent of the insurers say they are set to increase their exposure to US equities, while a tenth plan to cut it. About the same number say they are likely to cut their holdings of European shares as those who plan to add to them.
The study also finds limited appetite among insurers to increase their holdings of domestic government debt.
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