Investment Strategy for Life Insurance Companies

Very Hard Institutional Portfolio Mgmt Insurance Companies

As a portfolio manager for a large life insurance company, you have been tasked with asses\sing the investment strategies that align with the company's liability profile and regulatory constraints. The company holds a sizable amount of long-term liabilities due to its annuity products, which necessitate a suitable asset allocation strategy to meet both return objectives and solvency requirements.

Your investment team is evaluating three different strategies based on risk-adjusted returns. Each strategy incorporates various asset classes, including equities, fixed income, and alternative investments.

Given this context, which of the following investment strategies would be most appropriate for maximizing long-term returns while ensuring the company can meet its liabilities from the annuity products?

A strategy focusing heavily on high-yield corporate bonds to enhance yield without significantly altering duration.

A balanced allocation between equities and lower-duration government bonds, complemented by a small allocation to real estate investment trusts (REITs) for income.

An aggressive strategy heavily weighted toward growth-oriented equities with minimal allocation to fixed income, prioritizing capital appreciation.

Hint

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