About Us
Syndicate Management
Investing at Lloyd's
tax-corporate-services
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About Us
Syndicate Management
Investing at Lloyd's
tax-corporate-services
News
Marnie Hunter | Argenta Private Capital Ltd
Recognised as trusted institutions with a long-term investment horizon, family offices are an attractive potential investor for boards and shareholders.
Perhaps more importantly, the sophistication of family offices has only increased in recent years, and the community is consistently seeking to diversify clients’ exposures.
This means exploration of new asset classes and sources of returns, particularly as equities and commodities experience price shock after price shock through geopolitical turbulence or market dynamics. Private debt issuance is one example of an overlooked class that has seen renewed interest from managers of family wealth.2
To ensure consistent returns for their clients, maintaining exposure to a rich, varied asset portfolio is key. In this potential constellation of assets, few classes have returns that shine as brightly as the Lloyd’s market, and, equally, have as low a correlation to others as specialty insurance.
The Lloyd’s of London insurance market has been a private investment vehicle for high-net worth individuals for several centuries; yet it remains an attractive but underutilised alternative asset class.
As family office investment strategies have broadened to prioritise alternative asset classes in recent years,3 Lloyd’s presents particular benefits that would suit the typical appetite of such investors. These include: strong long-term investment returns – with Argenta Private Capital Ltd (“APCL”) clients averaging at 12.1% over the past 15 years4 – and diversification.
While occasionally volatile and cyclical, Lloyd’s of London performance has low correlation with other classes and thus is a useful diversifying asset for family office portfolios. Volatility is influenced by risk selection and portfolio exposures, while cyclicality occurs in line with the insurance pricing cycle.
This low correlation with other asset classes, paired with the ability to pledge existing assets as collateral to create leveraged returns, holds particular allure to individuals and family offices.
By its very nature, investing at Lloyd’s is diversified, with exposure to multiple classes of business. This secondary diversification across a range of insurance lines has delivered returns that consistently overperformed many major indices on average.5
Combined with low correlation, this can create powerful incentives. When the FTSE 100 dropped by 31.3%6 during the global financial crisis of 2008, the Lloyd’s market was up by a healthy 17.7%7. Likewise, the FTSE 100 fell 14.3% during the 2020 coronavirus pandemic – but our clients were up by 3.6%.8 9
This does not mean Lloyd’s is risk-free: on the contrary, in five out of the past twenty years, the combined operating ratio (a crucial underwriting performance indicator for Lloyd’s) has dipped into loss.10
Lastly, Lloyd’s vehicles have several tax benefits that support estate planning, including business relief, which serves as an attractive addition to family offices and their focus on preserving wealth for future generations.
Limited private wealth exposure to Lloyd’s is a result of both the long shadow of unlimited liability, which is not a possibility for entrants today, and complexity. The intricacies of allocating capital to the world’s oldest insurance market – and the resultant exposures to complex phenomena – has often acted as a barrier to entry.
It is why expert advisors, such as APCL, exist. In fact, one of our key strategic priorities is to continuously translate industry jargon – helping us to educate interested parties on the opportunities at Lloyd’s and broaden access to the market.
We can advise diversified portfolios of insurance exposures, with a mix of syndicates and risk profiles, to create a tailored offering: diversification within diversification, as it were.
We can support family offices in identifying risk appetites and thus producing a suitable cluster of insurance assets to sit within their overall diversified portfolio.
Family offices exist to deliver long-term returns to their clients and recognise the value of face-to-face interaction and trust. APCL, in turn, is a business driven by valued relationships, spending significant time guiding each investor on their journey at Lloyd’s.
Once onboarded, investors are assigned a client director in whom they can build confidence over years and even decades. At our core, we are here to support our clients in navigating complexity, delivering exceptional returns and enabling investment in the Lloyd’s of London market.
While often overlooked, Lloyd’s is a star in the night sky of asset classes – shining just as brightly as the others. Sometimes, you simply need to look a little closer to discover its brilliance.
We were delighted to host a Family Office roundtable in May, in partnership with the consultancy and expert connector, WM Nexus. For further information or to continue the conversation, please contact our key speakers, Robert and Kate, using the details provided below.
Article Sources
[1] Deloitte Private’s latest report in its Family Office Insights Series - Global Edition explores the rapid expansion of family offices and offers a vision of the future landscape | Deloitte Global
[2] Loan Note: Family offices look to increase alternatives allocation; Latham adds to restructuring team
[3] Family Offices and Their Increased Appetite for Alternatives
[4] APCL Research Team; analysis of agency returns as per APCL Private Advised Clients
[5] Howden Re report on the Lloyd's market; What Are the Average Returns of the FTSE 100? - IG UK
[6] When markets move, the FTSE 100 tells the story | LSEG
[7] What to consider when backing Lloyd's of London syndicates | MoneyWeek
[8] FTSE 100 suffers worst year since financial crisis - BBC News
[9] APCL Research Team; analysis of agency returns as per APCL Private Advised Clients
[10] Howden Re report on the Lloyd's market