As insurance investment portfolios have become increasingly complex, global and diversified, batch-based processing models and legacy platforms struggle to keep pace with investment decisions being made across multiple markets, time zones and public/private assets. Legacy technologies, infrastructures, and processes are causing insurers to manage investment portfolio allocations and diversification based on stale and incomplete portfolio data that may be a day or more old.
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Hybrid funds have emerged as an increasingly popular way to satisfy investor demand for diversification resulting in exceptional returns. These vehicles are designed to focus primarily (but not exclusively) on illiquid investments through a blend of the longer-term investment strategies of closed-end private equity funds and the trading and hedging strategies of open-end hedge funds. This offers investors exposure to a wide variety of asset types, affording greater flexibility in liquidity options.
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According to a McKinsey & Company survey, cost management, growth and digital capabilities are three top priorities in both business units and corporate centers as they focus on tackling economic uncertainty. In an effort to reduce costs and still show growth, companies are establishing strategies to define a new normal. Outsourcing is a business strategy that includes transferring work from a company’s employees to an external party. Many companies outsource their services and the creation of goods with the goal of decreasing costs such as employees, overhead, equipment and technology.
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We previously published a "Real Asset Services – Opportunity Zones" whitepaper discussing the tax incentives available through investments in Opportunity Zones from the 2017 Tax Cut and Jobs Act. Since then, the IRS has issued several updates, and in 2020, COVID-19 caused many issues and was extremely problematic within the Qualified Opportunity Zone space.
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At the recent Houlihan Lokey Asset Management Round Table 2021, we heard from a number of experts on key topics of importance to managers and allocators on the current climate and how they are navigating the evolving market conditions. Here are some of the main takeaways from this webinar.
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At Private Equity Wire’s Technology Summit last month, we participated in the Data Analytics panel. The panel discussed technology developments, tools, and insights. What should private equity firms be doing to optimize the way they source and aggregate data? Can predictive analytics help bring marginal gains to investment portfolios?
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The great oil crash of 2020 was felt around the world when WTI crude oil futures finished at negative $37. Airfreight and personal transportation fuel, jet and gasoline fell due to lack of demand. Companies were eager to see stay-at-home orders expire and see people on the roads. Despite these slumps, there were some energy bright spots in 2020 that will continue into 2021. Petroleum byproducts like naphtha and fuel oil have done well due to waterborne shipping and the need for plastics for PPE.
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Insurance companies and alternative investment managers are converging in the pursuit of higher yield investments, and we are seeing this play out in several ways: insurance companies continue to increase alternatives allocations through limited/general partnership structures and/or by acquiring alternative investment managers in order to gain deal flow and expertise. At the same time, alternative investment managers are investing in insurance companies or launching re-insurance ventures to create a steady stream of capital inflows from premiums.
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