The authors review some best practices for building and managing a reinsurance portfolio, including what it takes to do effective sourcing of reinsurance business, thoughts on pricing and underwriting the book, what it means to optimize a reinsurance portfolio, and effective risk management practices.
With greater frequency, investors are wondering whether, and when, the Federal Reserve’s extraordinary money printing will cause rampant inflation. A review of the past century provides interesting insights, particularly between 1933 and the late 1940s when the Federal Reserve printed money at comparable levels to those of the Bernanke Fed.
More frequent review and adjustment of asset allocation, incorporating opportunistic investing and employing flexible strategies, such as global asset allocation and global macro managers, enables investment programs to increase return and manage risk more effectively.
While little liquidity is making its way into the real economy, it is flowing into capital markets, leading to distorted prices and increasing risks to investors. Unfortunately, the longer accommodative central bank policies remain in place, the higher asset prices are likely to climb and the more investors will face an increasing risk of loss.
Traditional investment managers, looking for a way to boost returns and beat industry benchmarks, have begun to notice that many of the evaluation factors that socially responsible investment managers use also provide valuable insight into the overall financial health and performance of companies.
Emerging markets have been left behind during the bull run of 2013 as confidence in them has waned during a period of rising interest rates. Understanding the investment opportunity, however, requires a deep dive into the substantial structural differences between emerging markets and developed markets.
With interest rates at historic lows, investment strategies that worked in the past may be inadequate for the future. Although the prospects for traditional investments might seem impaired if rates reverse course, other sources of return may be available if one also considers managers versed in long/short investing across multiple asset classes.
While global investors have been curbing their home country biases, most remain too heavily invested in their local markets. The authors believe the lowest risk strategy to realize the global equity risk premium is through a market capitalization weighted approach, which eliminates the risk of overweighting a poor performing region.
Goals change over time, both in their definition and their priority. Financial markets also change over time, requiring investors to periodically revise their family goal matrix and re-examine their choice of ideal portfolios to fund family goals. Like all long-lasting marriages, flexibility is required to keep the investment portfolio in close compatibility with changing goals, needs and circumstances.
For the past 30 years, inflation has been a benign tiger. However, many signs point to its likely increase. And make no mistake – it can be a fearsome and stealthy force. Individuals can’t prevent inflation, but they can prepare for it, defend against it and, perhaps, profit from it.