Mar 24

The Goldman Sachs Insurance Asset Survey: Buyer Beware

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Today, the venerable and oft berated Goldman Sachs announced summary results of their annual Insurance Asset Management Survey. Although we await the full report, the summarized results provide some fascinating food for thought.

If past is prologue, the Survey of 252 CIOs and CFOs of insurers is heavily biased towards larger firms. I also have no doubt that a few mid and small sized firms snuck into the Survey.

The summary results released today are mostly obvious, but do have a few nuggets of interest.

First, one must remember that surveys are just that, surveys not facts. If I ask you if you are doing something you perceive as good, the natural tendency is for you to overstate your activity in the survey, and vice versa. Thus, there is a natural bias built in.

For example, the Survey says 40+% of CIOs plan on decreasing allocations to government and agency debt, as well as cash and short term instruments. Of course, if they were not already deemphasizing these low yielding alternatives, one wonders if they would be a CIO next year.

CIOs also intend to increase allocation to bank loans, US equity and real estate. Anyone involved in investing for insurers realizes that these asset classes are quite popular, to varying degrees. Although 37-43% of CIOs said they intended to increase these allocations, one must wonder to what extent the allocations will be increased. 1%? 5%? 10% or more? In any event, if a CIO wants to be seen in a good light, he or she will most certainly mention one or more of these asset classes. Perhaps the Survey will reveal this and other more pertinent details.

Contrast these sentiments with the Survey’s 30% who believe their peer group is taking on excessive risk, with 19% saying peer risk taking is insufficient. What are the true motivations behind these responses? Did those same 30% think the same about their peers last year? Or ten years ago? Are the 19% who say peer risk taking is insufficient really trying to goad their peers into taking on uncompensated risk, while they watch from the sidelines, waiting for the next inevitable ‘financial crisis’?

Perhaps the most useful data point in the Survey was the fact that more than half of the respondents think rates will increase significantly in the next two to three years. Or is it useful? Isn’t that about what the Fed’s timetable is (the Survey seems to have been executed in the latter part of 2012)? Wouldn’t it be instructive to know what these same companies thought about this question in 2011 or 2010? What is the trend, oh great and might Goldman Sachs?

I suppose when you add up the summary results of the Survey, as released thus far, one can attempt to conclude many things. But, one wonders how accurate those conclusions may be…except for the most important one.

The Goldman Insurance Asset Survey is a really good tool for raising awareness of Goldman Sachs Asset Management. Well played, Goldman Sachs. Well played.


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