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Laxman Pai, Opalesque Asia: Insurers' hedge fund holdings shrank by 9.9% last year to $11.8 billion, reversing a two-year growth trend in this area, said a study.
Property/casualty (P/C) insurers' reported a 10.7% decline in aggregate book-adjusted/carrying value (BACV) for hedge fund investments in 2022, compared with an 8.2% drop-off for life/annuity (L/A) companies, according to the new AM Best report.
The L/A segment's dollar exposure to hedge funds fell 8.2%, to $5.6 billion, and the P/C segment's, 10.7%, to $6.0 billion, said its Best's Special Report, titled, "Book Value of Insurers' Hedge Fund Investments Declines."
According to the report, after two consecutive years of double-digit gains, the performance of hedge funds turned negative in 2022 amid volatility and rising interest rates. Larger funds with assets above $3 billion were among the worst performers. However, the asset class did protect investors from significant losses in the equity and fixed-income markets.
Although the insurance industry's hedge fund exposure diminished, the number of the segment's hedge fund investments grew to 1,222 in 2022, from 861 in 2021 (net of acquisitions and disposals).
The average BA/CV of hedge fund investments acquired in 2022 was roughly a third of the overall average value, as insurers made many smaller purchases.
The decline in BA/CV can be attributed to the drop in both new investments and the market values of existing investments. ...................... To view our full article Click here
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