Swiss Re AG Chief Investment Officer Guido Fuerer said the world’s second-biggest reinsurer would invest as much as 5 percent of its funds in infrastructure if securities used to fund projects were more easily tradeable.
“The fact that we have invested less than 1 percent in infrastructure is not because we aren’t interested or we don’t think it’s a great asset,” Fuerer said in an interview. “Three percent to 5 percent is absolutely thinkable,” he said.
Swiss Re had investments of $127.6 billion in the first quarter, with about two-thirds in bonds and 7 percent in stocks. Reinsurers, which help primary insurers cover the costs of damage claims, as well as insurers are looking for new ways to invest as record low interest rates have undermined returns.
The switch to more infrastructure investments won’t happen overnight, the CIO said. “Current rules do not prevent but penalize long-term investments,” he said. Better disclosure on infrastructure transactions would also help, he said.
Project finance loans, which are used to fund infrastructure, represented only about 5 percent of the world’s syndicated-loan market at the end of 2013, the OECD wrote in its ‘Financial Markets Trends’ journal last year.
Fuerer would favor interest rates rising soon amid concern central bank policies to pump funds in into the economy are heightening the risk of financial instability.
“There is too much interference by central banks in the market clearing mechanism,” he said. “Some of the policy measures, such as quantitative easing, combined with financial regulation, lead to prices, yields, valuations that are disconnected and this poses financial stability concerns.”
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