The long-term investment strategies adopted by insurance companies are ones that asset owners and managers can learn from, according to AXA Investment Managers.
AXA IM said in a statement it identified key behaviours that have served insurers well over the years in relation to equity investing, including avoiding benchmarks, focusing on factors, reducing volatility and embracing sustainability.
The head of AXA IM for Australia and New Zealand Craig Hurt said there was a global shift by long-term pension fund investors who now use a number of target return strategies that global insurance companies have used for decades.
“Insurance companies have unique needs that give rise to some very specific behaviours and we think that some of the strategies they employ could be very relevant for Australian investors as this market transitions towards a retirement income phase,” Mr Hurt said.
“Insurers focus on generating specific returns to ensure they meet their liability promises rather than the less relevant return from specific market-driven benchmarks.”
AXA IM Rosenberg Equities Europe chief investment officer Gideon Smith said insurers have been wise to reject cap-weighted benchmarks because they typically have long investment horizons.
“An efficient way of eschewing cap weighted benchmarks is to focus on factors, or risk premia investing, which represents a more direct, low cost and transparent way to improve returns by capturing attractive equity characteristics such as quality, low volatility, value, momentum or small cap,” Mr Smith said.
“A relative-return perspective within the context of an overwhelmingly short horizon investment cycle risks sacrificing the long-run for the sake of the short-run.”