Online magazine Asia Asset Management has announced that Zurich Insurance, the Swiss life insurer, is preparing to make its first allocation to infrastructure debt moved by the low yields derived from fixed-income assets.
Speaking at a roundtable event in Hong Kong, Cecilia Reyes, Zurich Insurance's global chief investment officer, said that the company was seeking global infrastructure opportunities that tied in with the theme of environmental, social and corporate governance (ESG).
Ms. Reyes said:
"We've decided to make an allocation to infrastructure debt; we're in the process of implementing that strategy. The asset class would enhance the return on our portfolio; because infrastructure debt demands a liquidity-risk premium, which can range depending on the maturity from 150 to 300 basis points, because they're illiquid - you can't trade them."
Life insurance investors prefer long-dated and illiquid assets that can match the long-dated and illiquid nature of their liabilities.
Ms. Reyes declined to give the size of Zurich's forthcoming investment allocation in the infrastructure debt space, but she indicated that given the nature of the industry, the allocation would have to be substantial to justify the mobilization of resources.
Ms. Reyes said that Zurich would rely on third party asset managers with the appropriate expertise to execute the investments.
With about US$200 billion in assets, in its most recent financial results, Zurich reported a total return on group investments of 4.8% for the first half of 2014.