Etiqa, the insurance arm of state-owned Maybank, plans to invest more in foreign assets such as Asia-Pacific stocks, as well as domestic real estate.
It joins the growing ranks of Malaysian institutional investors, such as the Employees Provident Fund and KWAP, raising their offshore exposure.
Under central bank guidelines, each of Etiqa's insurance funds can have up to 10% in overseas assets, but less than 1% of its total portfolio is in foreign-currency investments. The biggest offshore allocation is to equities.
Fixed income accounts for 80% of the firm's RM22 billion ($6.96 billion) in AUM. Equities and property make up the remainder, the former accounting for the bigger chunk.
“Our next strategy is to look at investing more overseas,” says chief investment officer Norlia Mat Yusof*, based in Kuala Lumpur. “In the short to medium term, we are likely to invest more into Asia-Pacific bonds and equities, but probably nothing more sophisticated than that for the time being.”
As the firm does this and potentially also moves more into alternatives, she adds, it will probably need to engage fund managers either within the Maybank Group or external parties.
As for real estate, all the firm's assets are domestic and the allocation stands at around RM700 million, or 3% of AUM, all in direct investments. The central bank allows Etiqa to invest up to 20% of the portfolio in property.
“Our [real estate] allocation is likely to increase in the next one to two years, but we have no specific target now,” says Norlia. “This will initially be into domestic assets.”
Etiqa does not allocate to hedge funds, however, nor does it plan to do so. “We are not keen on hedge funds,” she tells AsianInvestor.
Asked how the insurer is positioned as regards global macroeconomic concerns such as the eurozone crisis and potential slowdown in China, Norlia says such issues are potential opportunities. “We are well positioned to take advantage of any weaknesses and are ready to go into stocks at lower levels.”
From a domestic perspective, she expects the regulatory market reforms under Malaysia’s Economic Transformation Programme will start to kick in by the end of 2012. “This should help boost economic growth in the years ahead," she says. “That will be a good opportunity to position ourselves for the recovery.”
In terms of the timing of boosting Etiqa's equity allocation, Norlia says the firm is seeking “greater clarity” at the end of the third quarter, when investors return from summer holidays.
“But there are also uncertainties looming due to the coming general elections in Malaysia, which must be held by April 2013,” she adds. “We will stay on the sidelines for the time being.
"We also think China has bullets to spare to help its economy, which should, in turn, bolster the outlook for other markets.”
* An in-depth Q&A with Norlia Mat Yusof will appear in the forthcoming (July) issue of AsianInvestor magazine.