Muang Thai Life’s approach to outsourcing assets
Muang Thai Life is casting a wider net for its investments and has a team in place dedicated to filtering and selecting external managers, having seen its assets under management (AUM) more than treble in less than a decade.
Given the low expected returns at home, it's not hard to see why. Ten-year Thai government bonds currently yield about 1.5% and by the end of 2020 are seen yielding less than that, according to half the delegates polled at AsianInvestor's third Institutional Investment Forum Thailand on Thursday (October 10).
“As our assets evolve, the composition changes over time [as] we began to invest more overseas," Muang Thai Life's head of research and corporate finance, Thananchai Sajjaporamest, told the forum. “[So] we started building expertise in this area by forming a team that deals with manager selection.”
The fruits of this are reflected in the 30% year-to-date jump seen in Muang Thai Life's foreign equity holdings, which stood at THB16.6 billion ($545.1 million) as of June-end, according to its latest financial statement.
That's still barely more than 3% of its total AUM. But it hasn't stopped the company from lobbying the Office of Insurance Commission for a rise in the country's cap on foreign investments to 20% from the current 15%, Sajjaporamest said, highlighting its ultimate ambitions in this area.
Thailand's second-biggest insurer is invested in cross-currency swap contracts in dollars, euros, bhat and yen, highlighting its ever-widening exposure to foreign assets.
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When choosing external managers, Sajjaporamest said, Muang Thai Life expects them to behave consistently.
“We think that once we select the managers based on a certain style, they have to stick to it because ... we want to see them performing for a long term,” he said. “So we would do a lot of due diligence to test whether they stick to that approach no matter what the cycle is.”
The flipside is that if external managers fall short of target one year it can tolerate it if the underperformance can be reasonably explained.
“We have the luxury of withstanding short-term fluctuations because as a long-term investor, we look for consistent, compiled return in the long term,” he said.
Muang Thai Life is also looking to learn, Sajjaporamest said.
“For global asset managers they have a lot of resources, hundreds of analysts, great corporate access. We don't have that kind of capability, [so] it would be best to leverage that expertise,” he said.
It's a two-way dialogue though.
“The way we view it is, we intend to have an intimate relationship with our external managers because we want to learn from them as well,” Sajjaporamest said. “In the long term we would be able to develop our expertise, technology, techniques and so on, so they can teach us and share with us.”
And it includes learning about investment strategies that use artificial intelligence and machine learning too, as these cutting edge technologies evolve, he said.