The world’s largest life insurers and their subsidiaries are starting to work collaboratively and across borders to deliver funds and products designed for a new era.
Local fund manager Ausbil, which is owned by one of the world’s largest insurers, held a media lunch this week to announce that it brought together four global funds.
Not every Aussie fund manager can pull something like this off. But Ausbil is owned by New York Life, the third-largest life insurance company in the US, which holds over $800 billion in assets under management. It also owns asset manager Candriam and investment company MacKay Shields, which has $179 billion in assets.
By leveraging the expertise of its fellow affiliates, Ausbil is now looking to gain an edge on its domestic competitors across four global strategies: infrastructure, small caps, natural resources and fixed income.
“Australia has been globalising as an asset management hub,” Ausbil CEO Ross Youngman said. “A lot of that is around infrastructure. Australia has really built a brand in that area.”
“We have reshaped the way we think about that into something I like to call essential infrastructure, which gives an uncorrelated approach to the returns that come out of this space, which are listed equities. It’s a different way of thinking about infrastructure.”
Mr Youngman said that over the last 20 years to 30 years there has been an acceptance in Australia that we can export our strategies and that we can do it successfully.
“We have gotten over that chip that we are Australians and can’t go out and talk about what we do. We have a number of very successful global equities managers in the marketplace. When international investors look at Australia, they see a very strong rule of law, they see expertise, they see a geographic location looking up toward Asia and they see something that is quite compelling.”
Neil Moriarty, senior managing director and portfolio manager at US-based MacKay Shields, said he has been working closely with Ausbil on a fixed income fund for some time.
“Over the last few years they have been working together on an unconstrained bond fund, which is an adjunct to a strategy that McKay Shields has been managing out of New York for some time,” he explained.
“The strategy was originally conceived in 2010 following the financial crisis as a way to navigate a low rate environment.
“What we have come to realise are the things that cyclically brought us to lower rates are now the structural things that are likely to keep rates lower for a munch longer period of time.
“When we think about it that way, this strategy compliments traditional index strategies that have heavy exposure to interest rates.”
This collection of New York Life affiliates are not the only ones joining forces to deliver new investment solutions.
Allianz Retire + Powered by PIMCO is another case in point. The idea behind the Australian company was conceived in 2014 when former Challenger state manager Adrian Stewart joined PIMCO as the head of the investment manager’s Australia and New Zealand business.
While Allianz has owned PIMCO since 2000, both businesses are run independently as so many global financial powerhouses and their subsidiaries are. But Mr Stewart saw an opportunity. He felt both institutions had all the tools they needed to offer real innovation in the retirement income space.
“If you think about the capability that Allianz has globally as one of the world’s largest insurers, and combining that with the capability and credibility that sit within the investment management component that is PIMCO, then you can bring the trust and confidence of the Allianz group together with that investment management capability and deliver something pretty exciting,” said Matt Rady, CEO of Allianz Retire + Powered by PIMCO told Investor Daily.
“Fundamentally that was something that appealed to the group.”
There appears to be a unique characteristic among life insurers that allows them to be innovative about investment products: patient capital. Unlike investment banks that chase returns on an annual or even quarterly basis, life insurance companies think long term. It’s the nature of their business.
“We went to the Allianz head office in Munich with a 10-year business plan,” Mr Rady says. “They asked us to prepare a 20-year plan. That shows you their level of commitment and patience.”