Trends in Investment Management

Abstract

Twenty years ago, the largest and best-known investment managers were in fact the investment divisions of large life insurers. These institutions managed enormous quantities of savings on behalf of a great many savers, whose long-term investments were often tied to life insurance policies. Wealthier private investors, by contrast, invested directly using the services of stockbrokers, private banks or financial advisors. In most countries, the life offices were quite heavily regulated, with limits on how much of their portfolios could be held in equities, and how much could be held in offshore assets. This limited the rate of return that could be earned, and discouraged innovation. Because each insurer managed a large proportion of the savings of its clients, and all were constrained by the same rules, they all tended to offer their clients the same range of services with about the same rates of return and implied fees. With little competitive pressure, profits were assured and comfortable.