Home>Events>The European Pensions Summit 2016

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23-25 May 2016
Fairmont Le Montreux Palace
Montreux | Switzerland

 

The EPI Summit offers Institutional Investors from Europe an intimate and stimulating environment for focused discussion with selected specialists able to support their asset allocation requirements and needs.

Attendees to the EPI Summit have a guarantee of up to 15 one-to-one pre-arranged business meetings with Pension Funds, Insurance Groups and leading Institutional Investors with assets over EUR 250mn€.These meetings result in uniting Europe’s largest Institutions with different solution providers who are able to satisfy their current needs and develop lasting relationships. A thorough selection process ensures a qualified audience, which grants unparalleled business and networking opportunities.

A sample of companies looking to make pre-arranged meetings include:

  • CIO, Aargauische Pensionskasse
  • MD & Director of Strategic Portfolio Management, APG Asset Management
  • CIO, AP Pension
  • Group Pensions & Benefits Director, Barclays Retirement Fund
  • Trustee, BT Pension Scheme
  • Director Group Pensions, Deutsche Post
  • Pensions Director, Endesa
  • Head of External Management, Fonds de Réserve pour les Retraites
  • Chairman Investment Committee, Swiss Steel
  • MD, Valtion Eläkerahasto

 

In order to create a balance of service offerings and increased value for the qualified advisers we represent, we limit solution provider competition at each asset class.  If you would like to be considered for the EPI Summit and further discuss how your profile fits with the audience please visit our event website and request to be contacted: http://events.marcusevans-events.com/epi2016-5/ or contact Ali Tamashiro at alit@marcusevansch.com

 

Topics of interest:

How to Invest in Insurance Linked Securities

 

By Sarin Kouyoumdjian

 

“Due to their independence from financial markets, property exposed insurance linked securities offer a unique generally non-correlated investment supplement to any fixed income, equity based or alternative asset strategy,” says Rick Pagnani, Chief Executive Officer, Mt. Logan Re, Ltd. “In addition to their inherent diversification benefits, certain investment managers in the space, such as Mt. Logan Re, take it to another level and generate Alpha in addition to the intrinsic Beta of the asset class,” he explains.  

 

What is the characteristic risk-reward profile of insurance linked securities?

 

Returns vary in proportion to the underlying exposure and the variability of potential losses associated with each instrument. Risk-adjusted returns also vary in time depending on market cycles and changes in the amount of capital allocated to the class.  

 

How do they compare with other asset classes?

 

Currently, the spreads on Mt. Logan Re investment returns are attractive relative to risk being borne in other asset classes. Market opportunities due to contraction and expansion of capital in the insurance and reinsurance space will alter these spreads.

 

What is the best way of investing in insurance linked securities?

 

The two most common methods of investing in this class are through the purchase of performance related catastrophe bonds and preferred shares.

 

What should pension fund CIOs take into account when making their decisions?

 

If a CIO values immediate liquidity over returns and diversification, then cat bonds are a suitable instrument. These instruments are not scalable as there are limited offerings traded in the market. If less liquidity is acceptable to a CIO, then quality returns from a diversified reinsurance portfolio and superior investment manager can be achieved through the purchase of a linked investment such as preferred shares offered from the segregated insurance accounts at Mt. Logan Re, Ltd.

 

What are some of the risks of investing in this space? How can they be mitigated?

 

The paramount risk is that of supporting a poor quality underlying reinsurance portfolio. 

 

Ensure your investment manager has exceptional access to a truly diversified portfolio of underlying reinsurance business, and not simply the lowest priced provider of bespoke collateralised reinsurance transactions.

 

What trends should pension fund directors plan for?

 

While currently below their historical peak, the returns offered by the best investment managers are attractive. These returns will vary over time and are likely to increase from their current levels in the future. In addition, the market is experiencing strong growth in terms of the volume and number of products offered including the types of underlying risks which provides opportunities for investors to benefit from this growth.

 

What strategies should they consider?

 

Pension fund directors should consider a one to five percent allocation to insurance linked securities with a three to eight year time horizon. It is imperative that they establish relationships with the best managers in terms of portfolio performance and ongoing access to business throughout the reinsurance cycle. When the market turns, any established relationships will become more valuable. Investment managers in the insurance linked security space are not looking for hundreds of relationships, but rather generally just a small number of substantive mandates. After the market improves, new relationships in this space will develop, but they will take time to onboard and service appropriately. Therefore, it is highly advisable to partner with an investment manager that can also provide a consistent suite of underlying insurance and reinsurance risks over the entire market cycle. 

 

 

 

 

Trading Illiquidity for Returns:

Why Longevity Risk is Attractive to Long-Term Investors

 

By Sarin Kouyoumdjian

 

“Alternative fixed income is very appealing for long-term investors. Capital can be deployed in a meaningful way, the markets are large, sectors can be selected based on their risk tolerance, and most importantly, there is yield,” says Andrew Plevin, Co-Chief Executive Officer, BroadRiver Asset Management, L.P.

 

Why should institutional investors consider fixed income alternatives?

 

Today, it is very difficult for fixed income investors to find attractive yield at a safe level of risk. It is an extremely challenging market. Yields are quite low and many of those who went into so-called high yields lost when the energy sector was hit.

 

The need to find return is as high as ever while the opportunities are at a historical low. Alternative fixed income is very appealing for long-term investors. Depending on the sector they invest in, yield can come from individual royalties or longevity risk, which have different return profiles. Some of these assets have bond-like properties and a steady cash flow, but they do not come in the form of a bond. Investors are allocating more and more to alternative fixed income to find cash flow that they cannot get in the fixed income world.

 

It all depends on their willingness to accept illiquidity. To benefit from these assets, investors have to recognise that a trade in illiquidity for return and cash flow is a good trade-off. If they can afford illiquidity, it is a very smart trade-off.

 

How could they take advantage of this opportunity?

 

As an asset, longevity risk is quite different from other markets where investors have a choice of indices or active managers. Longevity risk is not a generic asset. There are no indices for investors to utilise. The only way to access them is through fund managers who can originate, analyse and manage risks.

 

How does longevity risk compare against private equity?

 

Many investors ask this question, but it is like comparing apples and oranges. They have very different investment characteristics. Private equity is historically invested in through a manager, a handful of companies, the equity leveraged with loans, assets are tied to the public market, and investors wait 3 - 12 years for investments to mature. However, over the past dozen years, private equity has almost always failed to achieve the 20 percent IRR that investors were promised, returning 10 - 12 percent after all fees.

 

In comparison, longevity risk is less volatile, uncorrelated to the public markets and the return profile is lower. Our aim is 10 - 12 percent. In longevity risk, you would have perhaps 600 separate assets each of which is uncorrelated. A pool of assets that self-amortise and they pay back steadily over a period of 7 - 10 years. That makes a great comparison to other alternatives, fixed income and private equity.

 

What trends should pension funds prepare for?

 

We have an aging population with pension fund retirees living increasingly longer lives, so their liabilities for meeting those obligations will only grow. In such a low yield environment, investors feel compelled to take greater risk and they reach for the high return strategies, but that is a recipe that in a market setback they would pay a high price for.

 

Ultimately, pension plans are not in the investment business but in the business of writing cheques to retirees, so they need to look for the best combination of returns to be able to do that. Longevity risk is an ideal asset, because pension plans can afford long investment horizons and can trade illiquidity for return.

 

For More Information Visit: http://events.marcusevans-events.com/epi2016-5/

Contact Ali Tamashiro at alit@marcusevansch.com