Private credit might be less attractive than it was last year as investors rush into the market, but there are sweet spots to be found.
In a note seen by AsianInvestor, the CIRC has reminded insurance companies that the global credit crisis is still evolving and that they are faced with the tough task of stabilising the industry. The CIRC has criticised the free-flowing ways companies have continued to spend and their supposed widespread disregard of the severity of the crisis.
The note is aimed at investment and management professionals, in particular. The CIRC has named five state-owned insurance companies where salaries and executive spending have been "out of context", "surreal" and "divorced from reality". These five are the PICC, China Life, China Re, China Insurance Group and China Export Credit Insurance Company.
The CIRC is suspending all forms of equity incentive schemes and is warning companies to stick with salary benchmarks issued by the state. It says company management should take corporate governance seriously and stop paying executives at levels that are divorced from ChinaÆs economic situation, their level of experience, and performance.
Plus, the CIRC has told companies to forget about "grandeur" and "lavishness" when it comes to work-related expenses.
The CIRC wants the companies to file reports to the regulator by December 31 that show where they will be able to trim fat. Boards of directors and shareholders have been told to be mindful of their role as a counter-balance to management.
The CIRCÆs move shifts the balance of power between insurance companies and their executives. It was only a year ago that investment professionals led and won a high-profile fight for better remuneration packages and equity bonuses by threatening to resign. At the time, there was a widespread shortage of investment talent in banks, fund houses, trusts and private equity players.
In August 2007, the staff turnover in the asset management departments of insurance companies was once close to 40%. Many of the professionals who previously moved to private funds have sought to return to the insurance industry, however, since the A-share market began to tumble in November 2007.
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