“Initially I thought that going from asset management to insurance would be a very small move. In reality it's a very big move.”

This year has been eye-opening for Nicholas Gartside, who joined Munich Re as chief investment officer in March following stints as head of global fixed income at JP Morgan Asset Management and prior to that Schroders.

One major difference between the two industries is how cash allocations are viewed, Gartside told the audience at an event in London last week.

“As an asset manager, you look at cash and you rub your hands together because cash is a huge opportunity,” he said at the Insurance Asset Management Summit hosted by Clearpath Analysis on Thursday. “[But] what I've learnt in just eight months at an insurer is that when I look at cash, I just think 'risk'; I think misallocation of capital.”

Nicholas Gartside

Another change for Gartside in his switch to the German reinsurance giant is that he is now on the receiving end of pitches, lately invariably for private market strategies. Perhaps not surprisingly, given the prevailing global demand for such investments.

“Name the asset manager; they've all knocked on the door in Munich and all really tried to sell one thing: illiquids,” he said. The category cover assets including private equity and debt, infrastructure and real estate.

“I'm not negative on [such assets],” Gartside added. “I think there's a place for them, but I think the security selection element there is critical. Because in reality we're buying some of these types of structures for our successors – when you think of the holding period of a lot of these investments.”


While illiquids are “probably under-owned” and Munich Re may well add more such exposure , he said, “I do worry that these are remarkably easy to buy – or at least to commit capital to.”

And while they're “not remarkably hard to understand”, he added, “getting a handle on the risk is harder at a time when virtually everything is expensive”.

Gartside said he felt that there are some very good private market structures on offer, and that Munich Re has allocations to this area.

Yet there are widely held views that bubbles are forming in certain markets. Private debt has seen huge inflows in recent years, while many expect private equity firms to struggle to deploy the huge warchests they have built up.

Gartside certainly has concerns. If one is wondering where bubbles may be forming, where there could be excess leverage, and where investors are holding assets they don't fully understand, “this has to be an area [to think about]”, he said.

Other insurers, including the CIO of Hong Kong's FWD, have also voiced worries in recent months about the amount of capital piling into illiquid markets, notably private debt.

This helps explains why some asset owners and managers have been looking at new, less crowded markets, such as Asian alternative credit.


A core driver of the high asset prices is the amount of liquidity in the system, Gartside said during his presentation, as “the growth of cash has been colossal”.

“Since 2004 ... the amount of cash in circulation is up something like 300% to 350%,” he noted, substantially more than the growth of the world's debt and equity markets.

And this is an issue that will only worsen from here, Gartside said. The abundance of cash and “an excess of savings is with us, we would argue, for a while”.