 |
|
| Asset Allocation |
|
The decision on the strategic asset allocation is one of the most
important success factors in investment management. It accounts for
more than 90% of future investment results and consequently is management's
primary concern when guaranteeing long-term payment obligations. At
the same time, it is a very complex decision characterized by many
uncertainties and it also needs to be taken considering simultaneously
different business aspects some based on market valuation and others
relate to accounting figures.
Thus, essential client needs that must be addressed in the context
of an asset allocation consultation include:
|
| • |
Defining a specific
capital investment policy that will adequately cover liabilities under
long-term insurance obligations. |
| • |
Verifying the current
strategic asset allocation (SAA) and, where applicable, realigning
the long-term investment policy. |
| • |
Integrating dynamic
investment components (DAA) that allow to flexibly react to changes
in the financial markets while also explicitly taking into account
the demands of the liability side. |
| • |
Controlling the capital
investment side while allowing for distribution quotas, changes in
book values, profit-sharing participations, and their implications
for company target values. |
| • |
Making qualified assessments
of the advisability of “strategic plan assets” provided
for in a CTA. |
| • |
Quantifying the risks
associated with mismatches between assets and liabilities. |
| • |
Integrating alternative
asset classes into the investment policy along with an estimate of
their influence (in terms of risk and return characteristics) on the
overall position. |
| • |
Complying with regulatory
requirements relating to surplus and solvency requirements, stress
testing and exposure reporting. |
| • |
Performing “what
if” analyses to assess the effectiveness of hedging activities. |
Deriving a dynamic investment policy that is also aligned with liabilities
(optimal liability investment policy) is the main goal of asset-liability
modeling. One of the primary features of such analyses is the consideration
of the mutual and dynamic dependencies between liabilities and capital
investments. This is why key figures such as changes in the liquidity
ratio or the expected extent of future funding gaps always refer to
both sides of the balance sheet. In addition, these comprehensive
analyses convey a transparent and quantitative evaluation of whether
a particular investment policy is suitable for covering liabilities
and of what the likely effects will be on the company's main objectives.
Traditional asset-liability studies often neglect these important,
interdependent viewpoints. If the modeling of the assets is completely
separated from the behavior of the liabilities, this will easily lead
to inconsistent results. “Nonintegrated" studies, therefore,
are limited in their ability to give reliable answers to the fundamental
questions regarding the management of retirement plans.
With its “Integrated Asset Liability Solutions" risklab
offers just this type of fully integrated solution. This approach
stands out through its use of state-of-the-art concepts of modern
finance and its proprietary analysis platform. It also provides the
advantage of recognizing critical situations early on through regular
monitoring. Corrective interventions in investment policy may be taken
at an early stage.
|
 |
