In an environment where core asset prices are rich and volatility is predicted to continue, insurers have been looking to multi-asset solutions to access better returns.
The difficulties of the current markets are "compounded by Solvency II capital requirements which levy greater capital needs for increased risk and hence potential for return," says Richard Sarsfield, European head of insurance asset management at Morgan Stanley Investment Management (MSIM).
"In this regulatory asset allocation crunch, insurers are forced to seek assets with an improved return on regulatory capital profile, so efficient capital usage is increasingly the focus."
It is for this effort – to help insurance clients seek efficient use of solvency capital – that MSIM has been recognised. For example, MSIM has set up mandates with a limit on the solvency capital requirement (SCR), so that the client can be sure of the risk they are taking.
"This is an important consideration in the governance of outsourced multi-asset mandates," says Sarsfield.
In particular, the firm's Global Balanced Risk Control (GBaR) strategy is aligned with the needs of insurance clients working to specific SCR constraints, while also seeking returns for the SCR. Since its inception in June 2009, the GBaR team has managed globally-diversified multi-asset portfolios, targeting a stable, predetermined, level of risk.
One reviewer said: "For managing multi-asset portfolios, Morgan Stanley Investment Management puts extra thought into portfolio construction as well as capital consumption to arrive at performance which is attractive for an insurance balance sheet, while managing volatility across the economic and market cycles and protecting against tail risks."