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ALTERNATIVES

Insurance companies increasing outsourcing activity to alternatives — survey

Insurance companies are increasingly turning to alternative investments managed by third-party managers to meet challenges in the capital markets environment, said a survey published by the Insurance Asset Outsourcing Exchange.

The survey shows an uptick in outsourcing new alternative investment mandates to third-party managers over the past year.

On a global basis, alternative investments, which include private equity, private debt and hedge funds, accounted for 21% of new mandates in 2016, up from just 13% in 2015.

Specialized fixed-income mandates, such as emerging market debt, high yield and other focused strategies, remain the most popular outsourced investment solutions, accounting for 35% of new allocations in 2016 (down from 38% in 2015), followed by broad, multisector fixed-income mandates, accounting for 29% of new allocations last year (down from 31% in 2015).

Equity mandates account for only 10% of new allocations in 2016, down from 13% in 2015. Data was not provided for real estate and broad manager/balanced, which comprise less than 5% of total allocations.Insurance companies' appetite for non-traditional investment solutions continues to grow. A January exchange survey shows that insurance companies are seeking information on stronger risk management solutions, such as factor-based portfolio construction. They're also seeking more information about specialized fixed-income and alternative investment strategies.

The Insurance Asset Outsourcing Exchange, which offers information about third-party insurance asset management, is a service provided by money management consulting firm Eager, Davis & Holmes.