Why SAA

Insurance companies who use the services of an investment consultant often are hostage to the old saying, "You get out of something, what you put into it."  That means, in order to get the maximum value from your investment consultant, we feel the consultant must be directed to always be adding value to your company’s bottom line.  Here are some of the ways Strategic Asset Alliance can add value for your company.

1. Perform a strategic asset allocation analysis.

Over 90% of your company’s investment portfolio is determined by the strategic asset allocation decision.  That means the decision your company makes about this is over nine times more important than any value an investment manager might be able to add.  It also means you should use multiple sources of solid asset allocation analytics to determine the best decision.  Importantly you should not be bamboozled or enamored by fancy analytical models.

As an investment consultant, Strategic Asset Alliance is always questioning these models, both our own and those of an investment manager, in order to make certain that they are appropriate in the current environment.  As a consultant we also serve as a check against an investment manager suggesting asset classes that may be inappropriate in an insurance company environment.  In addition, we provide perspective on how other insurers within similar lines of business are handling strategic asset allocation and why.

2. Perform a ‘best practices’ review of the Investment policy.

Tied to the strategic asset allocation is a review that could indicate potential improvements to the existing investment policy.  The key here is establishing targets and ranges that will allow the manager sufficient latitutde to maximize risk adjusted total return, while staying within prudent guidelines.  One cannot underestimate the value of a review that improves the existing investment policy. Benefits include properly reflecting the strategic asset allocation, keeping the company from taking actions that have been problematical for other insurers, and having the peace of mind that the policy is both relevant to today’s capital markets and to the unique requirements of your company.  This would include consideration of asset classes not covered in the current policy.

3.  Establish a more relevant benchmark.

By the nature of the investment business, your investment manager must stay close to the benchmark.  Hence, your portfolio may be actually hindered because of an inadequate benchmark.  We develop benchmaks for our clients whose interest, credit and liquidity risks are carefully balanced and reflect the strategic asset allocation analysis noted above.  Many insurers, focused on improving investment income, are reviewing the importance of using risk adjusted yield benchmarks in addition to, or as a replacement for total return benchmarks.  By setting a benchmark tied to improved investment income, you can expect the manager to similarly position the portfolio.

4. Monitor and measure the manager’s performance.

Strategic Asset Alliance’s review does not look like a typical pension consultant’s review - for good reason.  This is a huge problem for some insurers when dealing with an insurance consultant that has penison and insurance business, since the consultant is likely to choose uniformity of presentation in order to keep his costs down, at the expense of properly reviewing performance in an insurance company context.  Our belief is that our review should discuss more than comparing performance against a benchmark. It should outline key strategic issues and make specific recommendations that are often used by company’s investment committee as a starting point for additional action.  It also compares our client’s current investment approach to those of other insurers. Finally, our reviews continually question and go beyond the typical investment manager supplied presentation.  This includes improving upon the manager’s analytical representations and improving our client’s understanding of the risks and rewards imbedded in the portfolio.  The value of approaching performance from an insurance perspective cannot be denied.

5.  Manager search / fee analysis

Strategic Asset Alliance has a proprietary database of managers with insurance specialization that can easily be called upon during a manager search.  In addition, we understand what the typical investment fee schedules are for different size insurance accounts and relationships (and they are not the ’stated’ fee schedules).  Our knowledge of the current market for insurance investment management should allow your company to potentially reduce current fees, and certainly maintain the fee structure at the most economical levels possible.  We advocate that purchasing and utilizing investment management services is like any other transaction.  Knowledge of what ‘the market’ is for those services and what expected fee levels are today and in the future is vital in order to be a savvy consumer of those services.