At the time of our last insurance survey in 2021, there were fully $15 trillion in aggregate assets with negative interest rates. Today, by comparison, there are literally none, as interest rates have spiked in record fashion across the global capital markets, especially in the United States. The good news is that insurance CIOs have navigated these wild swings gracefully through thoughtful asset allocation and risk management. Now, against a backdrop of higher interest rates, these CIOs have built pools of highly liquid assets that can deliver overall returns in support of loss reserves when they write new business (which most want to do more of). Moreover, the most recent investing environment has created a mentality shift where CIOs now can focus on leveraging both liquid and illiquid allocations to build more resilient, ‘all-weather’ portfolios. As a result, CIOs have proven not only that they can compound capital at above-average rates, but that they can also achieve important diversification benefits and provide a ‘fatter’ set of expected returns. Hence, the clear message we drew from our 2024 insurance survey participants is that there is ‘no going back’ to more traditional approaches to asset allocation, ones that had more of a singular focus on Liquid Credit. Indeed, having become more comfortable with the diversification and return enhancements that non-traditional investments can achieve, many CIOs are looking for opportunities to selectively allocate more to these areas. In particular, fully 64% of CIOs in our survey envision the Alternatives segment of non-traditional asset classes driving overall portfolio returns going forward.
If you are going to achieve excellence in big things, you develop the habit in little matters. Excellence is not an exception, it is a prevailing attitude.
Investor Intentions Are Clearly Headed Towards Higher Allocations to Private Markets
KKR 2024 Insurance Survey: Net % of Survey Respondents Planning to Increase (Decrease) Allocations in 2024
Special Thanks
Craig Lee, Mitch Lee, Vikram Govindan, Haining Yin, Go Yamashita, Jae Ko, Angela Pflug, Irene Yeung, Kei Ando, Jungwoo Kim, Gabrielle Bausano, Yasu Goto, and Alice Melnik
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