The Pulse, a new series of half-day events with a focus on topicality and current dynamics in specific asset classes of interest to insurers, was launched by the Insurance Investment Exchange at the end of March.
Their aim is to put experts in the asset classes on the spot with insights into the current state of the market, key trends, future prospects and risks as well as opportunities, all with a specific focus on the unique needs of insurers and key points of topicality today.
With the whole investment world buffeted by major global macro-economic issues from Brexit to threatened trade wars, economic uncertainty, fears of recession, and all happening just as central banks start to look less confident about economic prospects, how are key asset classes responding? This was the question at the heart of the first Pulse event which heard about the current state of the market in three classes attractive to insurers.
Brigitte Posch, Head of Emerging Markets, Apollo, discussed the prospects for Emerging Market Debt. She highlighted the significant growth of debt opportunities across a wide range of emerging markets just at a time when the banks have been pulling back their lending. This, she said, created opportunities for other institutional investors. Attendees debated case studies and examples that illustrated how good quality investment opportunities could be identified and incorporated into investment portfolios, while key risks today and some of the mitigants were also discussed.
The second asset class was Leveraged Loans which was examined by Jim Fitzpatrick, Head of Global Loans at CQS. He looked at some of the key issues that insurers looking to invest in this asset class ask about, such as default rates, yields and the availability of good quality investment opportunities. Default rates in the United States and Europe are now back down to pre-crisis levels, with the next couple of years seeing a healthy mixture of new loans and refinancing opportunities potentially.
Finally, the attention turned to Commercial Real Estate Debt. Duncan Batty, Investment Director Fixed Income for M&G Investments, took the audience through some of the recent trends in the market, highlighting some of the structural trends in the UK that have polarized the market, especially for offices, and the mixed prospects going forward for the retail sector.
Overall, despite Brexit fueled concerns, UK property pricing appears relatively attractive compared to other countries, especially for offices and student accommodation.
All three presenters had a detailed discussion with the audience and then wrapped up the fast-moving session with a short panel which picked up on the background themes of volatility, especially the continuing uncertainty created by Brexit.