Portfolio management practices of investment practitioners active in the long-term insurance industry

J H Mostert,F J Mostert,S J Steel

doi:10.4102/sajems.v4i2.2647

Abstract

In the long-term insurance industry, sound financial investment decisions depend largely on the portfolio management practices of the investment practitioners concerned. The ability of the investment practitioners to make well-informed decisions, as well as the strategies and policies underlying portfolio management practices, are the main issues of this research. Important correlations amongst various aspects of the financial investment decisionmaking process, as well as their association with the general information pertaining to the long-term insurers (which were disclosed during the empirical study), emerge in the closing section of this paper. The conclusions should be of prime interest to long-term insurers as well as investment practitioners who are working in that industry.

Highlights

This paper analyses the portfolio management practices of investment practitioners
This is reflected by the manageable number of companies which the majority of investment practitioners are required to monitor, as well as the high incidence of independent research that is usually supported by investment reports prepared by reputable external researchers
The present study leads to a number of conclusions that are of prime importance for portfolio management practice in the long-term insurance industry: The majority of investment practitioners who are responsible for the financial investment decisions of long-term insurers, should be able to tll0roughly assess each of the prospects included in their target groups of companies

Summary

INTRODUCTION

This paper analyses the portfolio management practices of investment practitioners (including portfolio managers and investment analysts). SAJEMS NS Vo14 (2001) No 2 indicate whether enterprises are assessed in isolation for financial investment purposes or whether risks are assessed from a portfolio point of view This type of information is of great value, since it indicates whether an enterprise which in isolation may not appear to be an attractive investment opportunity (due to the risks attached to the enterprise), may still pass the criteria of investment practitioners because of its limited impact on the risk profile of the relevant portfolios. Another aspect which receives attention in this research relates to whether the same investment decision-making process is adhered to irrespective of whether long-term insurance assets or funds of other clients are invested. Associations amongst various aspects of the financial investment decision-making process as well as their relation to the general ,information disclosed, are analysed

OBJECTIVE

Evaluation of alternatives

THE EMPIRICAL STUDY METHOD

EMPIRICAL RESULTS

Strategies and Policies for Portfolio Management Practices

CONCLUSIONS