Insurance Linked Strategies in 2018

At Mercer, we believe that as an asset class, Insurance Linked Strategies (ILS) have attractive diversification characteristics for investors who are able to bear the associated tail-risk. In recent times (prior to recent events) ILS has usually had either a neutral or underweight allocation relative to strategic weights in most investors’ portfolios, as while overall expected returns were fairly attractive compared to many other asset classes, they were less attractive from a historical perspective. 

With expected returns now higher, we believe existing investors should consider increasing their allocations (within sensible diversification limits) and those not currently invested should consider or reconsider the asset class.

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