April 08, 2019
Convertible Securities a Growth Opportunity for Insurers During Periods of Market Volatility
New Viewpoint Highlights Convertible Bonds' Potential to Enhance Capital Efficiency, Increase Diversification and Adjust Overall Risk Profile
Hartford, CT - April 8, 2019 - Leading global investment management firm Conning has issued a primer to help insurance companies better understand how convertible securities may offer the upside potential of equities, but with a bond’s downside protection, a valuable combination of benefits in a volatile investment environment.
The Conning Viewpoint, “Convertibles: A Flexible Asset for Insurance Portfolios,” explains how the asset, which can be converted to an issuer’s equity, offers potential portfolio growth. However, prior to a conversion, the security is a bond and maintains a price floor, said author David Tyson, Ph.D., CFA, Managing Director and Portfolio Manager, providing more consistent portfolio valuations.
“Convertibles can offer insurance portfolios the ability to enhance capital efficiency, increase diversification and adjust their overall risk profile,” Tyson said. “The challenge, however, comes in evaluating these securities, both in terms of their relative bond and equity values as well as in determining their fit within an insurer’s portfolio.” Conning’s capabilities across equity and fixed-income strategies as well as its deep experience with insurance investment portfolios position the firm as a strong candidate to manage convertible securities, he added.
Portfolio income continues to be a challenge for insurers, as yields on traditional fixed-income strategies have been at or near historic lows for nearly a decade. Volatility has also returned to equity markets, creating additional challenges for insurers seeking portfolio growth. Convertibles can address that challenge while also ensuring downside protection to help insurers meet obligations.
Conning is a leading investment management firm with approximately $133 billion in global assets under management as of December 31, 2018.* With a long history of serving the insurance industry, Conning supports institutional investors, including pension plans, with investment solutions and asset management offerings, award-winning risk modeling software, and industry research. Founded in 1912, Conning has investment centers in Asia, Europe and North America.
*As of December 31, 2018, represents the combined global assets under management for the affiliated firms under Conning Holdings Limited, Cathay Securities Investment Trust Co., Ltd. (“SITE”) and Global Evolution Fondsmæglerselskab A/S and its group of companies (the “Global Evolution Companies”). The Global Evolution Companies are affiliates of Conning. SITE reports internally into Conning Asia Pacific Limited, but is a separate legal entity under Cathay Financial Holding Co., Ltd. which is the ultimate controlling parent of all Conning controlled entities.
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