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Factor-based sustainable multi-asset solutions for insurers

Factor-based sustainable multi-asset solutions for insurers

03-07-2019 | Visione

Multi-asset products may be popular, particularly among insurers. But low yields and an increasingly stringent regulatory environment are posing challenges. Factor-based solutions that efficiently integrate sustainability criteria are a natural solution to address the challenges insurers face.

  • Guido  Baltussen
    Guido
    Baltussen
    Head of Factor Investing

Speed read

  • Insurers face both rising regulatory pressure and a low-yield environment 
  • Sustainable, factor-based portfolios are a natural solution
  • These portfolios can be tailored to insurer’s objectives and constraints 

The current low-yield environment, rising pressure from clients and regulators to increase transparency and cost efficiency, and soaring demand from clients and regulators for sustainability integration all represent significant challenges for insurers. Factor-based, multi-asset solutions effectively address these challenges.

Backed by decades of academic research, the solutions offer attractive and uncorrelated sources of return, as well as high levels of risk control and transparency, at relatively low cost. Our own research and experience running such strategies show that adding factor allocation across the major asset classes generates significantly higher risk-adjusted returns compared to purely passive strategies in all asset classes, while offering an attractive fee basis for insurers.

Instead of simply replicating the market index, as passive strategies do, or focusing on a small subset of the investment universe, as is common with fundamental active portfolios, factor strategies can screen the entire universe and over- or underweight hundreds to thousands of instruments simultaneously.

At the same time, they eliminate the human or emotional biases that can sometimes drive investment decisions. They also make it possible to integrate sustainability criteria through elements such as exclusions, ESG score integration and impact investing, as a means to improve the overall sustainability profile of the portfolio.

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Building customized solutions

Factor-based, multi-asset solutions can be tailored to suit a specific insurer’s needs and priorities. An insurer will have specific objectives and constraints for (segments of) their investment portfolios and therefore require tailored solutions that align their investments to their goals.

Their quantitative nature makes it relatively easy to integrate additional objectives and constraints in the security selection and portfolio construction process

Factor-based approaches lend themselves particularly well to such situations. Their quantitative nature makes it relatively easy to integrate additional objectives and constraints in the security selection and portfolio construction process. 

The starting point is to determine the investment objectives for the strategy, such as delivering consistent returns over time, maximizing return on capital or achieving specific sustainability targets.

The next step is often to customize the solution, while remaining consistent with the investment objectives. At Robeco, we highlight three main areas for customization: risk and capital considerations, investment building blocks, and sustainability integration. The ideal investment solution is derived from combining the investment objectives with additional adjustments in these three areas.

Proven expertise

Robeco has been very active in the field of sustainability and factor-based investing for over 20 years, having designed over 150 factor-based client solutions. Our approach translates our factor-based and sustainability integration building blocks into rigorous risk-controlled solutions that efficiently integrate sustainability considerations.

All these elements result in customized and sustainable factor-based, multi-asset solutions that effectively deal with the challenges faced by insurers today.

Disclaimer

La relazione non è consultabile da utenti di paesi in cui l'offerta di servizi finanziari esteri non è consentita, quali i soggetti statunitensi.

I dati forniti non verranno comunicati a terzi. Le informazioni sono destinate esclusivamente agli investitori professionisti. Tutte le richieste pervenute saranno verificate.

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Disclaimer

Confermo di essere un cliente professionale

Le informazioni e le opinioni contenute in questa sezione del Sito cui sta accedendo sono destinate esclusivamente a Clienti Professionali come definiti dal Regolamento Consob n. 16190 del 29 ottobre 2007 (articolo 26 e Allegato 3) e dalla Direttiva CE n. 2004/39 (Allegato II), e sono concepite ad uso esclusivo di tali categorie di soggetti. Ne è vietata la divulgazione, anche solo parziale.

Al fine di accedere a tale sezione riservata, si prega di confermare di essere un  Cliente Professionale, declinando Robeco qualsivoglia responsabilità in caso di accesso effettuato da una persona che non sia un cliente professionale.

In ogni caso, le informazioni e le opinioni ivi contenute non costituiscono un'offerta o una sollecitazione all'investimento e non costituiscono una raccomandazione o consiglio, anche di carattere fiscale, o un'offerta, finalizzate all'investimento, e non devono in alcun caso essere interpretate come tali.

Prima di  ogni investimento, per una descrizione dettagliata delle caratteristiche, dei rischi e degli oneri connessi, si raccomanda di esaminare il Prospetto, i KIIDs delle classi autorizzate per la commercializzazione in Italia, la relazione annuale o semestrale e lo Statuto, disponibili sul presente Sito o presso i collocatori.
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