A recent report by Fitch Ratings, outlined in an article from Hedge Week, shows that property/casualty (P/C) insurers, “invest in alternative and other less traditional asset classes, including hedge funds…, in an effort to gain portfolio diversification and enhance investment returns.” At the end of last year, the report notes that alternative investments represented eight percent of the industry’s invested assets.
Between 2008-2012 and 1996-2012, alternative investments helped generate the P/C industry “significantly” higher returns with lower volatility compared with equities. The report goes on to explore whether declining yields and low interest rates will push the P/C industry to increase allocations to alternatives. Fitch does highlight that the growth in, “unaffiliated alternative investments has been relatively modest over the last several years,” while also noting that, “going forward, the industry’s holdings in alternative assets are likely to increase moderately due to market appreciation and existing unfunded commitments.”
Read the full text of the Hedge Week article here.