Build on opportunities with real assets
Christoph Gisler, head of infrastructure equity at Swiss Life Asset Managers, explains the benefits of investing in real assets, and how infrastructure investments can support insurers' net zero strategies
How have recent macro-economic trends affected Swiss Life Asset Managers' real asset strategies for insurers?
Long term investors consider market movements as part of the business plan, and so do we. A highly diversified portfolio across sectors and countries, and a substantial allocation to real assets, bolsters the ability to perform well regardless of the macroeconomic environment.
It also helps to avoid unnecessary risks. The short-term tactics is about the balance of higher inflation and the probability of a mild recession. The latter must be incorporated in business case scenarios. That's where active asset management is important.
We prioritise companies that own essential infrastructure assets, as well as contracted or highly resilient infrastructure-related assets. The goal is to achieve a diversified infrastructure portfolio across various sectors with a focus on defensive assets.
Are real assets a good diversification and hedging tool against inflation?
Yes, they are. The result of an analysis of our infrastructure research team shows real assets help to reduce the portfolio risk of a multi-asset class portfolio.
Unlisted infrastructure equity has also shown a positive correlation to inflation, which means if inflation increases, the total value of unlisted infrastructure equity rises.
Investors with a high allocation to bonds can protect their wealth with such an allocation.
This is because these equity investments are investments in real values that generate ongoing operating cash flow and thus constitute a corresponding asset protection.
Within the clean energy value chain, it is important to identify those new technologies with above-average growth and return potential, manageable risks and high ESG benefits.
Examples of such technologies that Swiss Life Asset Managers is currently pursuing with regard to specific investments include renewable energies, biogenic fuels, solar thermal plants and battery storage.
How can infrastructure investments support insurers in their net zero transition strategies?
We place a particular focus on low-carbon transition opportunities in our infrastructure activities. The transition towards a low-carbon economy creates major opportunities for infrastructure assets. For us, fields such as renewable energy, clean tech, digitalisation and logistics represent key areas of opportunity.
Swiss Life Asset Managers, for example, is helping the transition to a cleaner transportation sector.
Swiss Life Asset Managers is a leading investor in the rail sector and is thereby helping passengers and freight to shift to low carbon rail transportation. A notable example is our investment in Helrom, a highly innovative train operating company, which is using its proprietary freight wagons to take heavy vehicles off the street, thereby not only saving thousands of tonnes of CO2, but also reducing congestion on the roads.
Infrastructure investors are also active in the field of electrical vehicle charging and are financing the build out of the charging infrastructure that is necessary to further increase the penetration of electric vehicles. In addition, we are continually active in financing the expansion of capacities for the production and storage of renewable energies.
Why should insurers come to Swiss Life Asset Managers for infrastructure expertise?
Swiss Life Asset Managers has a broad approach to the infrastructure sector. It has deployed well over €3bn ($3.2bn) in 2022 in all major infrastructure sectors.
It has been pioneering with its creation of the largest German battery storage portfolio, its investment in Infrareal, the operator of two pharma parks in Germany, and Helrom, a highly innovative freight train operating company.
We recognise the potential of future infrastructure markets at an early stage and anticipate the underlying opportunities. We have defined appropriate success factors and investment targets for our investments and pay attention to an advantageous risk-return profile.
In addition to a wide range of risk factors, ESG criteria is also an integral part of the due diligence and investment process. This ensures responsible and sustainable investments.
Contact person – Swiss Life Asset Managers (swisslife-am.com)