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Measuring the effect of diversification into foreign credit

  • 16 July 2021 (10 min read)

The challenges for investors from the insurance sector are clear, but the solutions sometimes less so. We are living in a world where interest rates will remain low for a considerable time and where the pandemic recovery will likely be uneven and volatile for issuers. In addition, regulation and accounting regimes are constantly evolving while insurers are also expected to be at the forefront of the transition to a new era of sustainability.

At AXA IM we have long and deep expertise in managing insurance assets, for our parent group of course, but also for a large and growing roster of third-party clients. We believe that this kind of optimised diversification can deliver effects (such as lengthening duration and potentially higher returns) that assist with asset liability management, without negatively impacting financial statements under IFRS9 or requirements around regulatory capital.

In all, we manage around €450bn in insurance assets, most of which is in fixed income, and our scale allows us breadth. We manage corporate debt assets from offices across Europe, Asia and North America, and in this truly global position we see potential advantages for our institutional clients. At a recent webinar hosted by Hans Stoter, Global Head of AXA IM Core, we explored this theme of diversification. AXA IM Core Chief Investment Officer Chris Iggo set out the macro backdrop for insurance investors, and our specialists Arnaud Lebreton and Sebastien Proffit, detailed how investors might put this into practice

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