Insurers explore barbell investment strategies

Barbell asset allocation strategies are attracting interest from insurers as they position for rising rates and look to reduce Solvency II capital charges

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Insurers seeking yield enhancement in their credit portfolios are exploring the benefits of using so-called barbell investment strategies.

A barbell strategy sees an insurer concentrate investments in two groups: long-dated, hyper-safe government bonds and short-dated, illiquid credits such as high-yield bonds, direct loans and real assets. The logic is that potential losses incurred on the short-dated assets will be counterbalanced by the stable returns from the long-dated sovereigns.

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