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.
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.
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.
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.
This report is not available for users from countries where the offering of foreign financial services is not permitted, such as US Persons.
Your details are not shared with third parties. This information is exclusively intended for professional investors. All requests are checked.
The Robeco Capital Growth Funds have not been registered under the United States Investment Company Act of 1940, as amended, nor or the United States Securities Act of 1933, as amended. None of the shares may be offered or sold, directly or indirectly in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”)). Furthermore, Robeco Institutional Asset Management B.V. (Robeco) does not provide investment advisory services, or hold itself out as providing investment advisory services, in the United States or to any U.S. Person (within the meaning of Regulation S promulgated under the Securities Act).
This website is intended for use only by non-U.S. Persons outside of the United States (within the meaning of Regulation S promulgated under the Securities Act who are professional investors, or professional fiduciaries representing such non-U.S. Person investors. By clicking “I Agree” on our website disclaimer and accessing the information on this website, including any subdomain thereof, you are certifying and agreeing to the following: (i) you have read, understood and agree to this disclaimer, (ii) you have informed yourself of any applicable legal restrictions and represent that by accessing the information contained on this website, you are not in violation of, and will not be causing Robeco or any of its affiliated entities or issuers to violate, any applicable laws and, as a result, you are legally authorized to access such information on behalf of yourself and any underlying investment advisory client, (iii) you understand and acknowledge that certain information presented herein relates to securities that have not been registered under the Securities Act, and may be offered or sold only outside the United States and only to, or for the account or benefit of, non-U.S. Persons (within the meaning of Regulation S under the Securities Act), (iv) you are, or are a discretionary investment adviser representing, a non-U.S. Person (within the meaning of Regulation S under the Securities Act) located outside of the United States and (v) you are, or are a discretionary investment adviser representing, a professional non-retail investor. Access to this website has been limited so that it shall not constitute directed selling efforts (as defined in Regulation S under the Securities Act) in the United States and so that it shall not be deemed to constitute Robeco holding itself out generally to the public in the U.S. as an investment adviser. Nothing contained herein constitutes an offer to sell securities or solicitation of an offer to purchase any securities in any jurisdiction. We reserve the right to deny access to any visitor, including, but not limited to, those visitors with IP addresses residing in the United States.
This website has been carefully prepared by Robeco. The information contained in this publication is based upon sources of information believed to be reliable. Robeco is not answerable for the accuracy or completeness of the facts, opinions, expectations and results referred to therein. Whilst every care has been taken in the preparation of this website, we do not accept any responsibility for damage of any kind resulting from incorrect or incomplete information. This website is subject to change without notice. The value of the investments may fluctuate. Past performance is no guarantee of future results. If the currency in which the past performance is displayed differs from the currency of the country in which you reside, then you should be aware that due to exchange rate fluctuations the performance shown may increase or decrease if converted into your local currency. For investment professional use only. Not for use by the general public.