Singapore

HONG KONG-listed insurer AIA has set up a Singapore-based dedicated investment company to manage its internal funds in a move observers said might deliver better returns to policyholders.

The Business Times understands the new asset management firm, AIA Investment Management Private Limited (AIAIM), was officially up and running in January this year.

When approached, AIA Singapore confirmed that it has been granted an asset management licence from the Monetary Authority of Singapore (MAS) last Dec 13.

It said AIAIM will provide services exclusively to group businesses. These include dealing, and regional and specialist fund management as well as an increased focus on areas such as derivatives.

"The decision to locate the new centre in Singapore was based on a range of factors, including the regulatory framework, availability of professional staff and Singapore's connectivity to the rest of the region. AIA has a large and long-standing business presence in Singapore," said the insurer that celebrated its 85 years in the city last year.

AIA Singapore's former chief investment officer Cheong Poh Kin has been appointed chief executive of AIAIM and will lead the team of investment professionals.

And group chief investment officer Mark Konyn is chairman.

"The investment team of AIA Singapore had transferred to AIAIM, along with investment professionals from other AIA entities. AIA Singapore funds will continue to be managed by the former AIA Singapore investment management team," said the insurer.

Amid a prolonged low interest rate environment and an increasingly volatile financial landscape, insurers around the world have increasingly taken to riskier assets in their hunger for yield.

In recent years, many insurers have embraced alternative assets, such as property, infrastructure, private equity and hedge funds, as returns of old favourite government bonds hit rock bottom.

Observers said AIA's latest move is generally positive as it taps on the advantages of economies of scale.

By setting up a separate entity, they said AIA would be able to better attract fund management talent, in turn improving investment strategy and returns, therefore benefitting policyholders.

Another school of thought, according to some industry sources, is that AIA would have greater control over fund management fees and can help keep a lid on costs, compared to outsourcing investments to external fund houses.

That said, a senior executive pointed out that the higher charges of fund houses are not necessarily bad if the returns are superior.

With this development, AIA, whose earnings are to be released this week, joins the ranks of insurers that created separate entities to better manage their insurance funds.

The Singapore subsidiary of Tokio Marine Asset Management, the investment arm of Tokyo-based insurer Tokio Marine, manages its insurance funds while Canadian insurer Manulife Singapore has its insurance funds' investments managed by internal Manulife asset managers.

Other insurers have their own asset management entities that manage their funds as well as service external institutional and retail investors.

They include Great Eastern's Lion Global Investors, which has assets under management of S$42.5 billion as at end 2016; British insurer Prudential's Asian asset manager Eastspring Investments, which manages over S$124 billion as at end June 2016; British-based Aviva Investors that looks after Aviva Singapore's participating and non-participating funds; and French insurer AXA's fund house AXA Investment Managers.

Amendment: This article has been amended to reflect that AIA is releasing its earnings this week, not next.