Dynamic Asset Allocation for Insurance Companies

Easy Institutional Portfolio Mgmt Insurance Companies

ABC Insurance Company is a large provider of life insurance products. The firm aims to ensure that its investment portfolio provides adequate returns to meet the long-term obligations of its policyholders. Given the current market conditions, including low interest rates and rising inflation, the investment committee is considering re-evaluating the portfolio’s asset allocation strategy.

The Chief Investment Officer (CIO) suggests that the company should increase its allocation to equities to potentially enhance returns despite the associated higher risk. However, some board members are concerned about how this increased equity exposure could impact the overall risk profile of the company.

Which of the following approaches would best address the CIO's proposal while also considering the concerns of the board members?

Increase the equity allocation while implementing short-term fixed income investments to mitigate volatility.

Maintain the current asset allocation and focus on increasing the credit quality of the fixed income portfolio.

Implement a dynamic asset allocation strategy that adjusts equity exposure based on market conditions.

Hint

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