Digital Disruption Meets Fixed Income

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Peter J. Cornax,
Senior Insurance Investment Strategist and Portfolio Manager – Credit

Managing the later stages of the credit cycle, the low rate environment, and lower market liquidity adding to volatility all contribute to the circumstances that insurers must navigate in 2020. As we look forward a technology aided investment process will enable a smarter and faster investment process. Cutting edge technology will help insurers to maintain investments, put capital at work faster, and help to manage their liquidity needs.

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Key Highlights:

  1. Today’s market environment is very challenging and will continue to be as policies to counteract the effects of COVID-19 are implemented.
  2. The near-term shock may be quite large, but what will likely follow with all of the monetary policy and fiscal policy support is a sharp rebound.
  3. With this lower rate environment likely to persist it’s very important that insurance companies continue to maintain a reasonable pace of investment; making sure they take into account the maturities for this year. Insurers should also make sure that they’re looking at their longer-term goals and maintaining their yield profile.
  4. There is a real lack of liquidity in the market and the market continues to exhibit a highly fragmented trading Behavior. We’re now in an environment where there’s been a significant increase in dispersion and there are opportunities to use technology and use tools to generate higher Alpha returns.
  5. For trading, A.I. camp simplify information processing. Instead of pulling large amounts of data or discussing information with Bloomberg, all of that can be automatically aggregated into a single platform; providing a simplified visualization of the market.
  6. A.I. tools can process millions of data points to build various analyses (i.e.for market dynamics, liquidity trends, advanced pricing models, etc.) and help traders gain a better sense of liquidity in the market. This also allows liquidity to be integrated within the front of the overall investment process.
  7. A.I. tools can also process qualitative research and be free of traditional biases. Tools can analyze the key differences and similarities between research reports, regardless of length, and provide the most important findings.
  8. Speed is greatly increased with the use of A.I. Automation for trading, research and data processing allow investors to make quicker decisions, while reviewing the same amount of necessary information (if not more).

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