Yernar Zharmagambetov on How Duration Immunization Ensures Market Stability

_{Published on April 8th, 2025}

The financial landscape has undergone dramatic upheaval during the past half-decade, with unprecedented market swings and major pivots in monetary approach from the world’s economic powerhouses. Skyrocketing interest rates, relentless price pressures, and international tensions have ramped up pressure on banking entities, transforming risk oversight into the foremost concern for banks, insurers, and retirement fund stewards.

The spectacular downfall of SVB and Signature Bank during 2023 vividly illustrates the consequences of sloppy interest rate risk handling — even market titans can topple overnight. In their post-mortem analysis, the U.S. Federal Reserve uncovered the root causes behind these financial disasters: critical imbalances between asset and liability timeframes and a cavalier attitude toward rate fluctuations. These financial earthquakes conclusively established that survival in the financial realm hinges directly on the sophistication of institutional risk management frameworks.

“Interest rate risk has always been an important consideration, but in today’s volatile environment, it has become a decisive factor in determining the company’s financial stability as well as its long-term success prospects,” notes Yernar Zharmagambetov, an expert with more than 15 years of experience in the field of investment management and financial risk assessment.

With a background that uniquely combines a Master’s degree in Business Administration (Finance) from Narxoz University and engineering expertise from Satpayev University, Zharmagambetov brings both financial acumen and technical precision to risk management strategies.

Duration Immunization: A Strategic Approach

Financial institutions must protect long-term commitments from market volatility when interest rates fluctuate. Duration immunization offers a mathematical solution by balancing the sensitivity of assets and liabilities to interest rate changes. It allows institutions to maintain portfolio value regardless of market movements, which is particularly crucial for organizations with decades-long client obligations.

In Kazakhstan’s financial sector, Yernar Zharmagambetov at Halyk Finance has effectively implemented this approach. From 2022 to 2024, he applied these principles to a combined portfolio exceeding $1 billion, spanning three major subsidiaries of Kazakhstan’s largest financial group.

The implementation process reveals the sophistication behind effective duration immunization. It requires identifying mismatches between asset durations and long-term obligations, discrepancies often hidden within complex balance sheets. For Zharmagambetov’s team, this meant reallocating investments toward bonds and securities with calculated maturities that create a portfolio structure resilient to interest rate shocks.

“Many investment managers pursue aggressive returns during stable periods, only to see those gains evaporate when markets turn,” notes a veteran financial analyst familiar with the Kazakh market. “The true value of proper immunization strategies is that they deliver consistent performance across all market conditions.”

This consistency proved its worth during recent periods of extraordinary volatility. While many portfolios experienced dramatic swings, the immunized structure maintained stability, delivering consistent yields exceeding 15% annually. These results earned recognition at the International Investment Leaders Award in 2024.

“Portfolio immunization provides predictable returns and reduces the impact of interest rate volatility,” Zharmagambetov emphasizes. “This is especially important for insurance companies and pension funds with long-term liability structures extending decades into the future.”

The lesson for financial institutions navigating today’s uncertain environment is clear: mathematical precision in duration matching offers stability that speculative strategies cannot match. As central banks worldwide continue adjusting rates to combat inflation, this approach has evolved from a theoretical concept to an essential practice for institutions committed to long-term financial resilience.

Beyond Corporate Interests: Analyzing Macroeconomic Consequences

Effective risk management significantly impacts the entire financial ecosystem beyond the interests of any specific company. The strategies applied at the institutional level often ripple outward, influencing broader economic stability. Zharmagambetov’s work illustrates this clearly: the duration immunization model he implemented not only secured stable returns for his company but also helped strengthen the financial resilience of Kazakhstan’s insurance sector as a whole.

International financial institutions frequently point to the relationship between insurance company flexibility and macroeconomic stability, a connection that became especially clear after the global financial crisis in 2008. In its 2024 Financial Stability Report, the IMF notes that insurance companies control about 24% of all global financial assets, totaling approximately $35 trillion.

“Ineffective interest rate risk management in the insurance industry can trigger a chain reaction in the bond market,” says Zharmagambetov. “When insurance companies are forced to adjust their portfolios due to sudden rate movements simultaneously, this collective action can generate significant price volatility in both government and corporate bond markets, ultimately affecting global borrowing costs and financial stability.”

Drawing from his own experience, Zharmagambetov highlights the crucial role of institutional investors in emerging markets. According to data from the National Bank of Kazakhstan cited by the expert, insurance companies and pension asset managers represent key institutional investors whose combined assets exceed 25% of the country’s GDP. He argues that implementing advanced risk management methods in these institutions, such as duration immunization, creates a multiplier effect that benefits the entire economy.

The World Economic Forum’s “Global Risks Report 2024” confirms that financial instability ranks among the top five most likely global risks. Kazakhstan’s experience during the sharp interest rate fluctuations of 2022-2024 demonstrates how tailored strategies, such as the one led by Zharmagambetov, can safeguard not just an individual company but contribute to systemic stability across the region.

“When we talk about the financial resilience of insurance companies, we must understand that it is about protecting the interests of millions of people whose pension savings and insurance policies depend on our ability to manage risks,” emphasizes Zharmagambetov. “According to our estimates, implementing the duration immunization strategy in the largest insurance company in Kazakhstan helped save around USD 85 million in potential losses during the first year alone following sharp rate hikes.”

Global Perspective and Technological Innovation

Numbers on spreadsheets only tell half the story in modern risk management. While duration immunization has strong theoretical foundations, bringing these concepts to life requires bridging the gap between financial theory and practical application. This challenge requires both human insight and technological tools.

What keeps risk managers up at night isn’t just market volatility — it’s the challenge of translating complex mathematical concepts into actionable strategies that protect real people’s savings. For Zharmagambetov, this means embracing technology not as a replacement for human judgment but as an extension of it.

“Today’s complex market environment demands sophisticated analytical capabilities that go beyond conventional approaches,” says Zharmagambetov, whose status as a member of the CFA Institute since 2023 underscores his commitment to the highest professional standards in investment management. “Advanced analytical models allow us to identify emerging patterns, quantify potential vulnerabilities, and implement preemptive risk mitigation strategies before market shifts materialize.”

This isn’t just abstract theory. Millions of retirement accounts hang in the balance when insurance companies face sudden interest rate spikes. Financial institutions that leverage machine learning algorithms and data analytics consistently outperform those relying solely on traditional methods — not by small margins but by differences that translate into substantial financial security for everyday citizens.

Under Zharmagambetov’s guidance, his team developed a life insurance portfolio valuation model tailored to real-world insurance conditions. The results were remarkable: a forecast accuracy rate of 94%, far exceeding the industry standard of 82%. For ordinary policyholders, this difference is between promises kept and broken.

The technology gap becomes particularly evident in emerging markets like Kazakhstan and Central Asia. Only 28% of regional insurance companies currently employ advanced mathematical models to manage interest rate risk, creating a clear divide between forward-thinking institutions and those still vulnerable to market shocks.

This exceptional effectiveness stems from his ability to connect technical expertise with practical financial knowledge — a skill cultivated through his unique business administration and systems engineering educational background. Such an interdisciplinary perspective allows for connections that specialists in either field might miss.

The impact extends beyond practical applications. Through four published papers in specialized financial journals, his research explores how combining traditional duration metrics with modern computational techniques can strengthen portfolio immunization strategies — work that doesn’t just live in academic journals but finds its way into real-world financial systems that protect everyday investors.

For insurance companies and pension funds, these technological innovations translate directly to improved stability and predictability, ensuring that policyholder claims are paid and retirement incomes remain secure even during turbulent market conditions. At its core, this technology-enhanced approach to duration management isn’t just about financial metrics — it’s about keeping promises made to millions of people who depend on these institutions.

Striking the Strategic Balance Between Risk and Return

The experience of managing the investment portfolio of Kazakhstan’s largest insurance companies demonstrates that the competent application of duration immunization strategy can simultaneously address two key objectives: minimizing interest rate risk and ensuring stable returns. Adopting advanced risk management strategies, including duration-based approaches, has improved stability and reduced volatility across the country’s insurance sector.

Interest rate volatility will persist in global markets over the next few years. Central banks in large countries should continue to actively use interest rate policies as a tool to combat inflation, creating additional challenges for institutional investors.

Under these conditions, Zharmagambetov and his team’s experience at Halyk Finance is a valuable case study for the entire region. The methodology they developed for managing investment portfolios using the principles of duration immunization demonstrates how financial institutions can survive and thrive amid high market uncertainty.

“The future of the financial market belongs to those institutions that can harmoniously combine innovative technologies, deep financial expertise, and a responsible approach to risk management,” concludes Zharmagambetov. “Our experience shows that even during periods of maximum market volatility, a properly structured investment portfolio can generate stable returns and provide reliable capital protection for clients. This is not just a business objective — it is a matter of trust and financial security for millions of people.”