Insurance Asset Risk Awards 2023 - UK & Europe

Investment solutions for a changing world

Invesco's head of UK insurance distribution, Joel Marques, explains the asset manager's capabilities in alternative and passive investment strategies – and why both offer benefits in these challenging and uncertain times

Why should insurers consider alternative investments in today's environment?

Joel MarquesAcross the board, insurers are seeking diversification in their investment portfolios. Although public liquid asset classes are attractive in today's market environment, insurers are seeking to diversify their portfolios to alternative asset classes such as real estate and private credit, including senior loans, which provide a good hedge to interest rate rises or inflation.

The demand from insurers for alternatives has been high. For example, we understand some of our clients' growth strategies where a key focus is to grow their market share of business in bulk purchase annuities (BPAs).

To do that, insurers are looking at longer dated alternative investments within the matching adjustment criteria. We anticipate approximately £40bn-60bn ($48bn-$72bn) BPA activity this year and we believe insurers will have a need to deploy to alternative asset classes at a faster pace.

Insurers also need to partner with an asset manager that can originate, manage and deploy assets based on their requirements. There is also growing demand for small and medium-sized insurers to partner with asset managers that can provide access to multiple alternatives strategies which are tailored to their needs

What areas of the alternatives market does Invesco focus on?

On the general accounts side, there is growing demand for non-domestic alternatives in real estate debt and private debt.

On the policyholder side, there has been growing demand from insurers who want to diversify their existing UK property exposure, for instance.

What makes Invesco's alternative solutions stand out?

Invesco's alternative solutions offering is made of three key pillars:

  • We are one of the largest real estate managers in the world and we manage over $89bn as at 31 December 2022 in real estate across equity and debt strategies
  • Invesco's Private Credit platform is one of the largest private side senior loans managers, with ~$40bn as at 31 December 2022, and 30+ years history across bank loans, direct lending and special situations
  • We also offer customised solutions to our clients through our multi-alternatives platform, which combines Invesco's in-house alternatives expertise, with leading 3rd party boutique private markets firms that complement Invesco's capabilities. This multi-manager approach provides clients with a single point of access to a range of high quality, highly customised capabilities

Our scale, combined with the breadth and depth of our offering, means we have the flexibility to meet insurers' needs as markets evolve, with the capability to build tailored multi-alternative solutions.

Is it the right time for passive investing given the current economic uncertainty?

Market conditions have been volatile with high inflation and interest rates, additionally, most insurers have made a commitment to net zero as well. But can insurers use a passive investment strategy off the shelf?

What insurers might need is a customised passive solution that is cost effective and assists in navigating market conditions and net zero commitments. That is where Invesco can provide a solution. Invesco managed over $433bn as at 31 December 2022 through ETFs and custom indexing solutions. We have the right scale to execute passive strategies as per the requirements of client.

For policyholder investment strategies, there is continued demand to use passive approach for exposure to efficient markets such as US Equities while also custom index solution could be developed for thematic strategies.

On the general account, there are innovative ways to use passive indices for completion portfolios.

Does Invesco plan to grow its alternative and passive investment products this year?

Invesco is committed to offering clients best in class solutions, this includes alternatives and passive investment products. We offer a broad spectrum of alternatives solutions through 3 key pillars: real estate, private credit and multi alternatives.

Based on demand from clients, we anticipate growth in our real estate debt and value add strategies across US Europe and Asia as well as growing demand in US direct lending and senior loans.

Our passive products are innovative and could be customised based on needs such as meeting net zero targets in a cost-efficient manner.

The key message for insurance clients is to remember the high level of customisation we offer across alternatives and passive strategies.