In the third part of Aviva Investors’ liquidity optimisation series, they look at how bespoke liquidity portfolios that take into account the interplay between different assets can suit the needs of insurers. Read this article to understand: the key features of effective liquidity solutions for insurers, the importance of “the interplay effect” between assets, and liquidity, capital-stability, yield and capital-efficiency considerations

The topic of liquidity has come into greater focus in the wake of recent market events and regulatory changes. Regulators around the world are asking investors to hold more liquidity or placing greater emphasis on existing rules. Recent liquidity risk events have pushed many investors towards higher liquidity allocations.

The first article in our liquidity optimisation series addressed the amount of liquidity investors need to hold. You can find out more on this topic in “A bigger splash”.1 In our view the amount of liquidity any investor should hold represents a delicate balancing act between potential liquidity needs and wider allocation choices. No easy task, but one that can be approached through a combination of scenario analysis and good liquidity-risk governance. Liquidity needs to be valued appropriately in a broader strategic asset allocation…

This article is reproduced with the kind permission of ICMIF Supporting Member Aviva Investors. For more information click here.