Theme 4:
Asset allocation
in fixed-income
In a relatively low-return financial environment
being driven as much by policy as fundamentals
it is critical to adapt quickly to unexpected market
shocks or monetary policy shifts.
While the strategic asset allocation of insurance
companies is usually focused on matching investment
portfolio flows with liability projections, insurers can
also implement tactical asset allocation to help generate
additional return and draw the maximum benefit from
the prevailing macro environment.
Adopting a dynamic, flexible approach to asset allocation
across a wide range of fixed-income instruments can
offer significant advantages over a static portfolio
approach. Effective tactical asset allocation can help
portfolios adapt to changing market conditions, while
still optimising risk and return.
In a relatively low-return financial environment being
driven as much by policy as fundamentals it is critical to
adapt quickly to unexpected market shocks or monetary
policy shifts. Any tactical asset allocation should be
implemented in a transparent framework which takes
into account a comprehensive assessment of the various
risks involved and their impact on the insurer’s economic
capital position. This framework must remain flexible
enough to take advantage of any significant macro or
monetary policy changes.
At BNY Mellon we work closely with clients to help
develop customised tactical asset allocation strategies.
We can also help establish a clear picture of the risk
factors that need to be taken into consideration and the
risk parameters that should apply to individual portfolios.
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