Allianz Investment Management (AIM) has opted to promote its Asia-Pacific chief investment officer Nikhil Srinivasan to group CIO based in Munich from the start of next year. He relocates from Singapore.
This is a landmark move, given how rare it is for a European company to install an Asian CIO. It may be seen as a reward for helping AIM to negotiate the financial crisis well in the region. The group's life insurance businesses in Asia have also been performing, achieving 45% year-on-year growth in the first nine months of 2010.
AIM takes care of all the insurance assets of holding company Allianz SE, managing €440 billion ($586 billion) in group shareholder and policyholder funds. It sets the investment strategy for this money.
Srinivasan, a 42-year-old Singaporean, has been AIM’s Asia-Pacific CEO and CIO since 2006. He cut the asset manager’s equities exposure to the bone in August 2007 at less than 1%, just a month before the collapse of Lehman Brothers triggered financial market meltdown.
“When the draw-downs came in Asia we were pretty much unaffected,” he reflects. “There was too much euphoria in Asia [in 2007] and an uncertain trajectory was developing in the US, so we cut our risk. It was an out-of-the-money call and it could have been wrong, but it turned out to be right.”
Srinivasan has a background in absolute-return-type funds, having previously worked as a hedge fund manager as well as a Morgan Stanley trader. “I am more of a trained absolute manager and that sort of galvanises my thinking, so I think of things from a macroeconomic point of view,” he points out.
As AIM group CIO he will be responsible for the investment strategy across asset classes, sorting out strategic and tactical allocation relative to its liability portfolios.
He is clearly being moved into the hot-seat in Munich, at the heart of the eurozone. “There are a lot of important calls to be made in the next few years and we have got to get a lot of them right,” he says. “Investment income is a key part of our business and I think we need to make sure that will happen.”
Srinivasan expects 2011 to be challenging for investment managers across the world, given the unclear policy outlook in Europe, China and the US.
“Europe will continue to have an uncertain time,” he says. “You have heard about the Irish bail-out and there are concerns about peripheral countries. So you have to think about how monetary policy is going to develop to address these. Also, will these [euro] economies deliver some sort of growth in 2011?
“The second issue is what is developing in China, the fact that inflation has reared its head there. Again, there is a policy unknown in terms of how policymakers address this: through money supply, bank credit, currency or rates.
“And in the US you have QE2, but will that be enough to stoke economic pick-up or will there be a need for further easing?”
Evidently the fractured state of the US political system, with the present divide between the House of Representatives and the Senate, will make policymaking more difficult.
Srinivasan is neutral on equities globally for the next six months, and is also expecting normalised rates of economic growth in Southeast Asia, accompanied by moderate slowdowns in India and China, where there could be a move to cut back on credit.
“In Asia and the US you are going to see the long-end of the bond yield curve continue to move up,” he adds. “In the US you are going to see no change in short-term interest rates but you are going to see long-term interest rates gradually move up, suggesting inflationary expectations. In Asia you are going to see rates gradually edge up on the short term, with long-term interest rates to go up as well.
“For me the thread of the next six months is the unclear policy outlook accompanied by higher long-end rates, and that obviously has an effect on equity markets.”
He believes there will be opportunities to buy bonds at decent prices given that he expects bond yields to edge up in 2011. “That is a blanket statement for everywhere,” he suggests.
Srinivasan has worked for Allianz since 2003 and has been CIO of Allianz Global Investors (AGI) Asia-Pacific and CEO of AGI Singapore. AGI is the asset management group of Allianz SE that comprises several asset management entities including Pimco, RCM, AGI Capital, AGI Europe and AGI Asia-Pacific.
Bernd Gutting, who was head of group investment strategy for AIM based in Munich, will replace Srinivasan as CEO and CIO in Asia.