Insurers are confident in returns for growth-related asset classes including emerging market equities, but disagree about prospects for US stocks, according to research.
Half of the more than 300 insurance chief investment officers and chief financial officers who were surveyed said they expected emerging market equities to deliver the highest total returns in the next 12 months, followed by private equity and US equities.
However, fewer investors ranked US equities in their top three favourite assets classes compared to last year, said Goldman Sachs Asset Management, which has produced the annual insurer survey for seven years. This year 39% of respondent put US equities in the top three, while 44% did so in 2017.
US equities represented the greatest area of disagreement, with 13% expecting it to be one of the lowest returning asset classes.
The survey, which represents insurance companies with over $10 trillion (€8.17 trillion) in global balance sheet assets, also revealed 50% of respondents thought the universe of investment opportunities was deteriorating – the second highest level of pessimism since the survey began.
Insurers are focused on achieving adequate returns without leaving their portfolios overexposed in the event of a market downturn, and they expect to increase asset allocations to less liquid assets such as infrastructure debt.
Insurers generally believe the low-rate/low-volatility global environment is coming to an end and the biggest concern for the respondents this year was the risk of an economic slowdown or a recession in the US. Last year, political risk was ranked higher.
The survey also asked about cryptocurrencies and technology. Over two-thirds of respondents said cryptocurrencies cannot play a role in an investment portfolio and a third said the currencies were a potential risk to financial markets.
Almost half rejected the role of artificial intelligence and big data-driven investment strategies in portfolios. The greatest potential for these technologies was in improving product pricing, underwriting and claims management, respondents said.
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