Asia's premier asset owners: NZ Super and AIA
The past few years have amply demonstrated why the world’s most successful asset owners combine process discipline with hard work, talented personnel and a willingness to embrace new opportunities.
Some of this year’s winners demonstrated global standards of sophistication and knowhow, while others have been expanding their capabilities amid increasingly unpredictable market conditions.
It was not easy to pick the winners. In addition to gaining self-nominations, we sought out the advice of some of the most talented and experienced advisers and consultants in the markets. And we invited a small panel of judges to volunteer their expertise and knowledge to assess applicants, and suggest their own. That still led to some highly competitive categories, in which we had to choose between impressive organisations.
These awards are a testament to the dedication with which the region’s best institutions take the management of their assets. As the world increasingly traverses a period of political uncertainty and inferior fixed rate returns, the need for investors to be nimble and open to new ideas will continue to mount.
Our next institutional categories are for sovereign wealth fund and insurer. We explain why the winners, New Zealand Super Fund and AIA, respectively won in these categories.
SOVEREIGN WEALTH FUND
New Zealand Super Fund
As one of Asia Pacific’s most sophisticated asset owners, New Zealand Super Fund (NZ Super) continues to impress, even among its well-heeled regional sovereign wealth fund peers.
True, it didn’t get the very best results across the 2018-2019 financial year among its regional peers (Future Fund beat it out), but the NZ$44 billion ($28 billion) fund still made 7.02% in the year to June 30, while its annualised 10-year return was a whopping 14.04%. That’s an impressive performance record.
In large part it is down to NZ Super’s constant desire to challenge itself to do better, and find genuine value opportunities.
The fund references its performance against an internally created passive reference portfolio that makes up about two-thirds of its assets. This portfolio is comprised of 80% growth (mainly equity) assets and 20% fixed-income assets. NZ Super only actively invests in assets or funds that can be assessed as being likely to beat the reference portfolio’s returns.
From its independent board of governors down, NZ Super strives to make clear how and why it makes decisions
While the fund boasts great strength in its investment capabilities, the basis for this is a sustained drive for good governance. From its independent board of governors down, NZ Super strives to make clear how and why it makes decisions. This has extended to the demands it makes of its investments too, particularly when it comes to environmental, social and governance requirements.
It has introduced a customised internal voting policy, while last year it moved its listed equity voting and execution to a proxy voting agency, which will vote on its behalf instead of its external investment managers. The idea is to ensure consistency across its equity portfolio on how its shares are voted on governance, climate change and other issues. And this year it introduced a voting reporting platform on its website, which lets companies and other stakeholders view records how it voted at every annual general meeting.
NZ Super is currently in the midst of reviewing its entire organisation and will reweigh its passive benchmark by mid-2020 as well. That sort of willingness to self-analyse might seem strange; if it ain’t broke, don’t fix it. But the sovereign wealth fund is determined not to become complacent.
That mindset should keep it performing well for years to come.
INSURANCE COMPANY
AIA
Asia’s largest regional life insurer by assets remains ferociously intellectual about how it seeks to invest.
Much admired by fund houses for the depth of its investment approach, the insurer’s CIO, Mark Konyn, saw fit to add a set of deputy CIOs to its various countries of business across 2017 and 2018, to ensure the company has the pulse of local markets and can better take advantage of local investment options. In January 2019, it hired Trevor Persaud as its investment solutions head, to mainly create asset and liability management solutions for AIA’s general account portfolio.
In addition the company has built out a centralised regional investment hub in Singapore to support Konyn and his team. Their job is to assess overall risks and scope out opportunities that make sense for AIA’s investment portfolio as a whole. to help with its plans, and to ensure it meets rising regulatory commitments in the form of risk-based capital regimes and income IFRS 9 and 17 reporting standards.
AIA saw a strong start to 2019, with its investment assets rising to $218.39 billion as of June 30, up from $195.28 billion at the end of 2018. It had made $8.51 billion in investment returns in that six month period, nearly half of which was sourced from equities despite this accounting for just 19.9% of its overall portfolio.
That was some turnaround, given that AIA had reported a loss of $2.06 billion on its equities and real estate investments across 2018. In addition, the insurer made $4 billion in gains on other financial instruments for the first six months of 2019.
Konyn has told AsianInvestor of his desire to see AIA take advantage of more infrastructure investments too. And the insurer intends to keep building out its investment expertise for China, to support its fastest growing country operation, which had seen new business grow by 30% in 2018.
The company’s strong regional diversity should also help it weather the current tough business conditions in Hong Kong, its headquarters.