Going passive for their equity allocation has therefore been a natural step, as they sought more cost-effective solutions for their investments. But while passive products based on public indices have their merits, they also present serious drawbacks. This is encouraging a growing number of insurers to move to ‘middle-ground’ between passive and traditional active products, in particular Enhanced Indexing solutions that target time-test factor premiums with a low and controlled tracking error.
In this paper, we explain the benefits of targeting time-tested factor premiums for insurers. We also discuss why enhanced indexing is increasingly becoming a cornerstone of many insurers’ developed and emerging market portfolios.
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