Making gains in a zero interest environment

In an interview with the German magazine Focus, Allianz SE Board of Management member Maximilian Zimmerer makes a compelling case for life insurance. As he explains the investment alternatives open to Europe’s biggest investor in this era of the European Central Bank’s (ECB) zero interest rate policy, Zimmerer offers the same advice he would give his daughters.

 

It should come as no surprise that the advocate of long-term retirement provisioning recommends life insurance to his daughters. The numbers are on his side: “At Allianz Leben, we offer (a total return of) around three percent after costs ... where else can you hope to get that sort of return? European government bonds certainly aren’t the place to look.”
 
As to the big question of how an investor can escape the ECB’s zero interest rates, Zimmerer suggests using alternative investments; for example increasing the share of investment in real assets. He adds that Allianz has currently diverted as much as 80 percent of all net new investments into alternative investments. While infrastructure holds real appeal as an investment destination – three billion has been pumped into it so far – it takes quite some time to set up a portfolio. A typical investment for Allianz tends to be in the area of 150 million to 500 million euros. Wind energy is another attractive asset class: “We just surpassed the 3 billion euro threshold in this sector. We are also breaking into the US market, where projects are larger in scale,” says Zimmerer. Allianz has also invested in cable networks and electricity grids, is currently building a wastewater system in London and is operating a garrison in England.
 
The proportion of alternative investments could increase significantly on the whole. Zimmerer explains: “We have invested 94 billion euros – 14 percent of our investments – into real estate, mortgages, private equity and wind energy. These investments grew by 18 billion euros last year. I could envisage a situation in which they account for 20 percent of our total investments.”
 
While a number of commentators have been calling the long-term solvency of some insurers into question, Zimmerer clears up any doubts as far as Allianz is concerned. All of Allianz’ guarantees are covered by the existing portfolio for the next 30 years: “What is more, we still achieved a reinvestment return of 2.5 percent last year, despite being faced with what were practically zero interest rates.” And these attractive and calculable returns would certainly also be in the best interest of his daughter’s old-age provision.

Maximilian Zimmerer, member of the Board of Management of Allianz SE
Maximilian Zimmerer, member of the Board of Management of Allianz SE.

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