Insurance Asset Risk Awards 2021 - UK & Europe

Multi-asset manager of the Year - Morgan Stanley Investment Management

Multi-asset solutions have drawn increased attention in the volatile markets seen over the last year. Morgan Stanley Investment Management's (IM) innovative approach to include Solvency II capital requirements for UK and European insurers into its multi-asset strategy meant it stood out in this year's awards.

Low fixed-income yields, high solvency capital costs for some asset classes and continued market volatility mean that insurers are turning to multi-asset solutions to dynamically access economic and returns that use up Solvency II capital prudently.

The asset manager's Global Balanced Risk Control (GBaR) strategy has been around since 2009 and currently manages several billion in assets for insurance clients. Like most multi-asset funds, the strategy is expected to have a high level of flexibility in changing asset allocation, and when taking in exposure to risk assets it aims to provide stable risk-adjusted returns.

A key differentiator of the GBaR strategy is its starting point: a risk target, volatility or value-at-risk (VaR) number, together overriding the need for a traditional benchmark. Targeting volatility is a strong starting point, which enables the portfolio to be finely tuned to reflect actual VaR or a solvency capital ratio target. Indeed, for its European insurance clients, the GBaR portfolio managers have worked with MSIM's insurance specialists to include solvency capital constraints within the portfolios.

A customised SCR management solution can provide flexibility for the investment manager to allocate within the bounds of asset objectives, constraints and an SCR budget.

The strategy has provided stable risk-adjusted returns, with annualised returns of 5.93% and a Sharpe ratio of 1.16 since 2009.