Jeffrey Tan* is Hong Kong-based director of investment and corporate finance for Asia at Belgian insurer Ageas, managing €25 billion ($33.2 billion) in assets across the group’s life and property-and-casualty businesses in the region. It is in five Asian markets: China, Hong Kong, India, Malaysia and Thailand.
AsianInvestor: Do you invest in alternative assets?
Jeffrey Tan: Yes. For example, property as an asset class has really come into play – we have been focused on it more since the end of 2008, when we realised quite a few asset classes are not stable because their volatility is so huge.
For example, in 2010 we bought a commercial building in Thailand from Lehman Brothers, which had nine properties for sale in the country. This was seen as an expansion, as it was right next door to our life company offices. We leased 75% of the floor area that we acquired.
Returns from the acquisition have been very good in terms of rental yield. It’s also proved a good move from an ALM perspective – the rental income has been an almost perfect match for our liabilities.
A good added bonus is the unrealised capital gains from this acquisition. Market indicators suggest that demand, rentals and occupancy are likely to continue on the uptrend given the supply-side constraints for good-quality office space.
We are also open to Reits [real estate investment trusts] and equivalent assets, some of which are offshore investments.
How about other types of real assets, such as infrastructure?
In certain markets we’re getting into infrastructure debt and project financing. We’re doing more of this as banks pull back from this space, and we can afford to hold these assets for the long term, typically 10 years or more. In terms of the ALM fit, infrastructure provides long-term, stable and steady cash flow and decent yield.
For example, we are invested in the South-North water-transfer project in China [a $62 billion government scheme to divert 44.8 billion cubic metres of water a year from the Yangtze River in southern China to the Yellow River Basin in arid northern China].
Each country’s operation [within Ageas] has a local team that will look at whether each infrastructure project is worth investing in.
So your allocation to alternatives has risen?
Yes, in the past five to 10 years our exposure to alternatives has probably at least doubled. Property and infrastructure form the biggest part of this exposure – combined, they can account for as much as 5-10% of our AUM.
Whether this continues to rise depends on the markets, but it’s performing well compared with the plain-vanilla assets. Hopefully the global economy will get healthier – if so, that won’t mean we close our alternatives portfolio, but we may look again more strongly at traditional assets.
Do you invest in hedge funds and private equity?
Typically we are not allowed to invest in hedge funds, although they are permitted in Hong Kong.
The regulations are silent about this asset class in Malaysia, but the door remains open to insurers to seek approval for investments into hedge funds. Also, I think the Thai regulators are looking at this again.
In general, regulators in Asia are taking another look at what asset classes they should and shouldn’t allow.
If permitted, we would access hedge funds either directly or via funds of hedge funds – the benefit of the latter is that they have the expertise to select the best funds, and we don’t.
We invest in private equity both directly and through funds of funds.
* This is an extract from a longer interview due to appear in the February issue of AsianInvestor magazine.