Insurers and investors should prioritise investing in assets with little or no correlation to financial markets given the uncertain future for the global economy, according to PDL International, a provider of investment services to institutional and high net worth clients.
Speaking at the first Asia Conference on Investment and Portfolio Management for the Insurance Industry in Hong Kong, Keith Campbell Golding (pictured), chief representative for PDL in Asia, told an audience of senior management figures at insurers across the region that given the current economic climate, picking the right combination of assets in investment portfolios has never been so important.
Campbell Golding highlighted the strong performance of alternative assets with low correlation to financial markets during the market slump of 2008. He urged the audience to embrace alternative asset options as part of their plans for long-term growth:
“The economic crisis that has shaken world markets since 2008 has left the future looking uncertain. Bonds are incredibly expensive, and equities are looking shaky. There will be recoveries, but their size and duration are increasingly difficult to predict. This is why there has never been a better time to embrace alternative assets which display low correlation to financial markets, combined with impressive performance during these turbulent past few years. Identifying the right juxtaposition of assets is crucial, but there is no doubt that this is the approach the Asian insurance market should be taking.”
Campbell Golding also explored how many hedge fund strategies have become more correlated to financial markets since the 1990s, and have therefore delivered a less even performance since 2008 than many other alternative asset classes.
“The ‘risk on, risk off’ cycle across global markets is understandable, given the current economic climate. But investors need to find ways around it – and that means adopting asset classes with lower correlation to those markets.”