An alignment of interests equals a successful investment strategy
Alongside retail customers, the primary target group for Baloise Asset Management’s services are institutional investors, such as pension funds, that have a long-term investment horizon. These customers’ investment criteria are aligned with the interests of Baloise Asset Management, which is not the case for other providers in the market. The key to success therefore lies in using the same investment strategy that Baloise Asset Management uses for managing the assets of Baloise’s own insurance business. The benefits lie in being able to reap economies of scale and keep costs under control.
But the focus isn’t just on costs. The available products also need to be adapted to the requirements of the market. Thanks to its modular product offering, Baloise is able to offer institutional clients bespoke, transparent solutions that meet their particular needs. Core solutions for the following key asset classes are being developed:
Baloise Asset Management’s investment universe for external customers
With a property portfolio worth more than CHF 7 billion, Baloise is one of Switzerland’s biggest investors in real estate. In the past, this expertise was only brought to bear internally. Then, at the beginning of 2018, Baloise’s property department was converted into a real estate fund management operation licensed by the Swiss Financial Market Supervisory Authority. On 1 October 2018, it launched Baloise’s first proprietary real estate product for qualified investors. From spring 2019, retail investors will also be able to benefit from the growth of this fund when they take out a life insurance policy with Basler Insurance. The objective is for the real estate fund to continue growing in the future through acquisitions and capital increases.
Since 2013, Baloise has been invested in private debt in the form of senior secured loans. In spring 2017, all these investments were consolidated into a single fund open not only to all Baloise subsidiaries but also to external investors. The new product already has an impressive track record.
Purely in terms of volume, bonds make up the bulk of the insurance investments. In the prevailing low-interest environment, the challenge lies in generating sufficiently high and stable growth in order to achieve the guaranteed rate of return, while at the same time avoiding undesirable risks, for example with currencies. Baloise is positioned as an active manager that uses a systematic, rule-based approach to avoid the shortcomings of conventional indices. The aim is to generate a long-term return that is superior to that of a purely passive investment. This is achieved using a set of rules and strategies that are grounded in empirical research. Launched in December 2018, the new institutional fund is, for example, specifically tailored to the needs of institutional investors in Switzerland and invests on a currency-hedged basis in the most attractive bond markets from a Swiss perspective.
Because of the high capital adequacy requirements under the Swiss Solvency Test, equities play only a minor role in the allocation of insurance investments. However, they are an integral part of a long-term investment strategy. Here, too, systematic, rule-based approaches are used in order to achieve a superior performance over the long term compared with conventional indices. This expertise in the investment of insurance assets has now been successfully brought to bear for third-party customers as well. The Bâloise pension investment foundation’s global equities group ranked in the first quartile in the long-term KGAST comparison as at the end of January 2018. A new investment fund has also been set up that systematically limits the high risk of capital loss in the equities asset class.
In the segment comprising traditional mixed client portfolios and funds, Baloise’s offering encompasses various categories that are suitable for a range of risk appetites and have an outstanding track record: more than 90 per cent of the products are in the first or second quartile in the relevant peer groups of the multi-year comparisons published by Lipper and KGAST. And in recent years, Baloise has launched a range of dynamic products that limit downside losses on the basis of a prescribed risk capacity while at the same time offering unlimited opportunity for gains. These include the trend-following products launched in 2013 in partnership with C-Quadrat Arts and the investment foundation vehicles BAP Perspectiva, BAP Dynamic Allocation 0-40 and the new BAP Dynamic Allocation 0-80, all established in 2018. Just over a year ago, Baloise Asset Management also launched the BFI Systematic Flex Equity fund, which ranked in the top 10 per cent of its category in the year-on-year comparison for 2018 (Lipper peer group comparison).