Insurance affiliates hold their own at top table of Europe's asset managers

Companies: BlackRock, Morningstar, Pimco, Allianz Global Investors, Tikehau Investment Management, M&G, St James’s Place, RWC Partners, Columbia Threadneedle Asset Management

People: Neil Woodford

Many insurers' affiliated managers have been sent out by their parents to gather third-party assets in recent years – with varying success. The managers might put their affiliation to an underwriting group forward as a credential to win more insurance mandates, but a European CIO questions whether this can be a universal truth. David Walker reports

Asset managers that are affiliated to insurers make up half of Europe's 20 largest fund managers by assets under management.

At the end of 2018, the largest 10 captive houses held a combined €1.3trn ($1.4trn) net assets in funds.

The leading 10 independent managers held slightly more - €1.6trn – thanks in the main to the largest of them all, BlackRock and its€318.9bn in AuM.

The proprietary analysis by Insurance Risk Data examined fund-based money rather than mandate investments, and excluded cash funds and multi-manager products.

By focusing on funds the research may have missed many general account investments that underwriters (and pension funds) make directly into financial markets.

The analysis showed, nonetheless, the importance of what underwriters hold for themselves in funds, and what life companies invest via funds for their clients.

Morningstar data formed the basis of Insurance Risk Data's work. They calculate that Europe's managers had €7.4trn in funds overall, as at December 2018.

Overall, affiliates found raising new fund-based assets tough in 2018, growing their funds by just 3%. This was less than the rate of organic expansion at independent managers.

But most affiliates held onto the leading positions that they held back in 2016, when Insurance Risk Data research managed to separate insurer-linked managers from truly independent ones.

IRD found 171 managers owned to varying degrees by underwriters, out of 1,614 in total registered in Europe in the Morningstar database.

Cases ranged from complete ownership, such as the largest of Europe's affiliates Pimco and Allianz Global Investors, down to Tikehau Investment Management, where underwriters' stake is incomplete.

As insurers come to have more of their money managed via fund vehicles over time, particularly if the volumes are too small to justify segregated management, underwriters are becoming an increasingly important investor base for funds.

Overall, 1,820 insurers in the EEA outsourced €1.3trn, or 19% of their general accounts, into funds at the end of 2018, Insurance Risk Data found. Some of this went to independent managers, some stayed inhouse in funds seeded by the parent and run by its affiliate(s).

When trying to attract fresh insurance assets into their funds, affiliates often promote to underwriting prospects the ability to 'think like an insurer' – because the affiliate is born of one.

One non-life CIO based in London said, however, that any advantage captive managers may feel they have thanks to their parentage, over independent managers, is losing in currency.

The CIO employs both insurer-owned and independent managers among a dozen outsourcing partners of his firm. The affiliated managers come from some of Europe's very largest insurers, but he said the insurance experts at the unattached asset managers can show every bit as much understanding about his business as can the staff at affiliated managers.

The independent managers that his company has engaged are large and global, so he said: "They have their own teams of insurance experts, so it is not really an issue for us" to find expertise about insurance within independent houses.

Another CIO, of a general underwriter also based in the UK, said the rapid liquidity of funds, made collective investing a good option to take for securities that could be bought and sold fairly rapidly.

Some European institutions that used affiliates' funds to buy into less liquid asset classes have come somewhat unstuck this year, however. When M&G 'deferred' redemptions on its UK property fund in July, some investors including institutional ones were disgruntled.

Elsewhere the wealth manager-cum-insurer St James's Place was probably relieved it used a mandate structure to invest in UK equities with Neil Woodford, who gated many institutions into his flagship equity income fund when large redemptions struck – but could not curb St James's Place leaving, the same week, by replacing Woodford with RWC Partners and Columbia Threadneedle Asset Management.

A much-expanded analysis of the points made above forms part of a 200-page report on outsourcing by insurers across the EEA, Switzerland, Bermuda published by Insurance Risk Data. For more information on the report please email scott.davis@fieldgibsonmedia.com