GSAM: Insurers Name US Recession Worries as Top Risk

GSAM: Insurers Name US Recession Worries as Top Risk

The possibility of a US recession was named as the top risk to insurers’ investment portfolios, according to a survey by Goldman Sachs Asset Management.

More than half (52 percent) of global insurers cited the possibility of an economic slowdown or recession in the US as the greatest macroeconomic risk to their investment portfolios, according to a Goldman Sachs Asset Management (GSAM) survey. In fact, 55 percent predict that the US will enter a recession within the next three years, up from 46 percent a year ago.

Other top risks named include geopolitical tensions (52 percent), credit and equity market valuations (46 percent), inflation (42 percent), as well as credit and equity market volatility (30 percent).

Optimistic Market Outlook

Nonetheless, insurers remained optimistic about the investment outlook, with 55 percent expecting the S&P 500 to deliver total returns between 5 to 10 percent this year, while 18 percent forecast returns of 10 to 20 percent. 79 percent forecast the Fed fund rate to be 3 to 3.5 percent, with 81 percent anticipating a rangebound 10-year Treasury yield of 3.5 to 4.5 percent.

Overall, the asset classes insurers expect to generate the highest total returns in the next 12 months include private equity (18 percent), US equities (17 percent), commodities (13 percent), emerging markets equities (12 percent) and private equity secondaries (8 percent).

Preferred Asset Classes

On preferred asset classes, a net of 38 percent plan to increase allocations to asset-backed finance in their general account portfolios over the next 12 months. Other asset classes viewed as attractive include investment-grade private placements (net increase of 35 percent), senior direct lending (33 percent), private equity (25 percent) and infrastructure equity (25 percent).

«The investment environment has quickly become more nuanced and complex. Fluctuating macroeconomic conditions, geopolitical shifts, and rapid technological advancements are creating a landscape where disciplined asset selection across both private and public markets matters more than ever,» said Jared Klyman, global head of the insurance asset management business at GSAM.

GSAM’s 15th annual global insurance survey, entitled «Adaptation in Action», was based on responses from 434 participants from January 11 to February 3 who are senior investment professionals, including chief investment officers and chief financial officers. They collectively represent insurance companies that manage roughly half of the total balance sheet assets for the global insurance industry.