Singlife, one of Singapore's largest homegrown insurers, is a big believer in outsourcing investment mandates to specialists who can outperform.
That means the process of manager selection is crucial to investing success.
Kim Rosenkilde, chief investment officer at Singlife, in an exclusive interview with AsianInvestor, outlined the main criteria the insurer takes into consideration before handing out these mandates.
“We are a Singapore company. Whenever we can, we will always use a manager that sits in our community. We try to hand mandates to managers that benefit the local community,” Rosenkilde told AsianInvestor.
“Of course, some asset classes don’t always lend themselves to being managed from here; for instance, US equities are better managed from the US than in Singapore,” he said.
Some of the funds under the insurer’s S$10.6 billion (US$8 billion) in assets under management (AUM) as of end-March 2021, are managed internally — but most are managed externally.
EAGER FOR MORE
Singlife works with up to 10 investment managers currently, a spokesperson told AsianInvestor.
A good example of the insurer’s investment partnership is private investment firm Azalea Investment Management.
It co-seeded an ESG fund with Azalea in March 2022 by committing $50 million. Azalea is backed by Singaporean state-owned investor Temasek.
It has also seeded €50 million ($54 million) in the Qblue Global Sustainable Leaders fund and $100 million in the Copenhagen Infrastructure Green Credit Fund.
More such partnerships are likely. “We sincerely hope we continue [to add more managers],” Rosenkilde said.
The Singapore-based company is looking to move away from the conventional investment strategy of 60% allocation to bonds and 40% to stocks, to assets with different risk and return profiles, the spokesperson added.
These include increasing exposure to real estate, private debt, and infrastructure.
Singlife is a relatively new entrant in Singapore’s insurance market, having been launched in 2017 by founder Walter de Oude.
It was the first local insurer to be licensed by the Monetary Authority of Singapore since 1970.
In 2018, Singlife acquired the business portfolio of Zurich Life Singapore and in 2020, Singlife and Aviva Singapore teamed up in a $3.2 billion merger, making it the largest insurer in Singapore.
Rosenkilde said the insurer has a rigorous interview process to select investment managers.
“The process is very lengthy and it is evolving all the time, keeping it contemporary with global changes,” he said.
Asset owners who outsource investment management typically hope to find managers who have the capability and resources to outperform the benchmark as well as help to achieve long-term returns.
Asset owners will typically question potential investment managers on their investment experience, their main strategies, conditions under which they remove portfolio companies, how often they report to clients, and their risk management capabilities, a Hong Kong-based investment consultant told AsianInvestor.
More importantly, how managers handle failure or mistakes is also important to assess because occasional failure is just an unavoidable part of dealing with complex financial markets,” she said.
Rosenkilde shares that sentiment: one of the most important considerations in selection is honesty, he said. “Many of our questions are designed to see how transparent they are. For instance, can we have access to their back office?”
The Singlife executive said managers appreciate that the insurer asks them the ‘tough’ questions. “We are wary when people only talk about wins — it’s more intangible and is of less interest to us. We want them to be honest and transparent.”
The insurer has previously said it will refine its strategic asset allocation to incorporate sustainable investments, and has committed to reviewing its entire portfolio daily against key sustainability objectives. Not surprisingly, there is heavy scrutiny on the ESG credentials of potential investment partners.
“Our questions on ESG and diversity, equity and inclusion (DE&I) for managers go into triple digits,” said Rosenkilde.
He noted that while selecting managers for alternatives, the insurer does not hand out money to anyone who has not signed up to the United Nations Principles for Responsible Investment. “Of course, that is not all – there has to be a lot more than that on the ESG front,” he said.
The insurer in recent years has also started asking questions on what kind of gender and diversity rates a manager has, and how much time they spend on marketing as part of the selection criteria.
In addition, as much as possible, Singlife’s team also takes the time to visit the managers to assess how they operate.
“We want to see the working environment and whether they have the diversity they claim to have, for example. And it needs to be done on a continuous basis.
"Maybe it’s a novel approach, but it helps us to have an exceptionally clear understanding of the managers we select,” Rosenkilde said.
Singlife’s team also talks to their investment peers in Europe and the US. “What managers sometimes don’t realise is that we often compare notes,” said Rosenkilde.
“There is a big investment community out there.”
In situations where the insurer makes co-investments with partners like large European or Canadian pension funds, there is a chance to speak to other investors to find out their views on different managers.
"Sometimes, we even recommend funds we have worked with to other asset owners,” he said.
The company in early March picked Citi and BlackRock’s Aladdin to provide an integrated technology platform to upgrade its asset management capabilities.
The platform will help Singlife constantly monitor risk exposures and optimise portfolio risks -- offering yet another example of how the fund leverages partnerships to enhance portfolio performance.