Ping An Insurance Group aims to increase international investments via its Hong Kong-based overseas investment platform from under $20 billion to at least $50 billion, as part of a larger ambition to expand its offshore fund business to over $100 billion in assets under management (AUM), according to Hoi Tung, co-chief investment officer of the insurer.
Speaking to AsianInvestor in an interview, Tung noted that less than 10% of Ping An Insurance Overseas's $20 billion in AUM is currently sourced from external clients. The insurer wants to increase this fivefold by allocating more resources from Ping An itself and by developing investment capabilities to attract external institutional investors.
“Hopefully, within a period of three to five years, we’re going to build a much bigger presence in terms of assets under management (AUM) here in Hong Kong. We’re striving to have over $100 billion in AUM…. half of it from third parties and half from the parent insurer,” Tung said.
This focus should help the parent insurer to lengthen asset duration, as infrastructure and private equity investments typically last for 10 years, he said. Ping An's duration gap as of last year was 6.6 years and it is keen to narrow this if possible.
It can also help to raise the investment return of the parent insurer as statistics show that the returns on private markets certainly outperform public markets in the long run, he added.
That means sourcing almost $50 billion in AUM from third parties, an ambitious goal. Tung said Ping An intends to achieve it by joining hands with global fund houses, similar to its tie-up with UK-based Merian Global Investors last year.
“Certainly we welcome that kind of opportunities. Merian is a very good partner,” he said. “Certainly we would love to have more relationships with other fund houses with similar interests… it’s part of the efforts to grow the third-party business.”
Ping An Group's investment portfolio of insurance funds (including life and health business) had total investments of Rmb 2.79 trillion ($404.15 billion) as of end-2018, meaning that its Hong Kong operations manage about 5% of the parent company's investment assets.
Most big insurers in China have fund management subsidiaries to invest large amounts of their assets. Hong Kong-based Ping An Insurance Overseas is the group's overseas investment platform, which chiefly makes alternative investments in global markets. Plus it owns Ping An Asset Management Hong Kong, which invests in Hong Kong-listed bonds and equities. Ping An has a seperate fund asset management division in Shanghai, which invests in China’s onshore market.
Ping An's Hong Kong-based operations are familiar with Hong Kong but lack experience areas of the international markets. So the Hong Kong fund arm hopes to team up with more global brands, to both build a wider distribution network for its products and to gain investment mandates from other asset owners, said Tung.
He also noted that the Hong Kong investment division hoped to attract third-party funds by pointing to a decent track record of investing funds on behalf of its parent, in particular in alternative asset classes.
More than 60% of Ping An Insurance Overseas's AUM is invested in global private equity, infrastructure, real estate and private credit. Equity and bond investments are mainly securities listed in Hong Kong.
It has taken a two-pronged approach in private equity investments, using its in-house expertise to directly invest in deals in mainland China, and co-investing in deals in the the US, Europe and Organisation for Economic Co-operation (OECD) countries. The latter has been necessary because Ping An AM HK lacks sourcing capabilities in the overseas markets, he said.
A spokesperson declined to specify exactly how well Ping An's overseas alternatives investments have performed, noting only "our portfolio has performed well and the returns meet our expectations".
Its infrastructure business is more challenging, because it’s long term in nature and offers lower returns than private equity. But Ping An Insurance Overseas drew about $758 million mostly third-party capital commitments to its global infrastructure funds as of their first close at the end of March, Tung noted.
The newly launched funds were partially seeded by Ping An with fund investments and co-investments, and Paris-based investment fund house Ardian has helped to anchor the funds, according to a press release.
The vehicles will combine Ping An assets with third party investments in infrastructure sector projects. They mark the insurer’s first step in turning its in-house investment capabilities into a global asset management business, it said.
Ping An is also looking to ramp up the quantitative investment capabilities of its Hong Kong fund arm.
The insurance group built out quant teams in its asset management divisions in Hong Kong and Shanghai last year, and quantitative investments is one of Merian’s strengths.
Much of Ping An AM HK’s equity business is based around a quantitative investing approach, with five dedicated staff using artificial intelligence programmes to help execute the strategies, said Tung.
“We have got 300 plus factors in the model and some of the factors are pretty specific, they are our own in-house proprietary factors. So that kind of distinguishes ourselves”, he said. He added the investment team applies algorithms that give non-linear projections, which can give more refined predictions on investment returns than linear ones.
Ping An aims to launch its first AI quant fund this week, the spokesperson added.
Look out for a feature story on Ping An Insurance Group’s plans to invest more offshore through a larger asset management arm in the AsianInvestor Summer 2019 magazine issue in June.