How Cathay Life's long-term vision stands out
AsianInvestor’s second annual Institutional Excellence Awards were introduced to highlight best practice, with awards handed out in 16 institutions collectively managing $3.5 trillion.
Staying within our markets category, for Hong Kong/Taiwan our judges selected Cathay Life Insurance for institutional excellence. They viewed it as among the most forthcoming to embrace changes in regulation to expand its investments, with high praise for commitment to a long-term vision.
The winners were announced on October 30 and received their awards at an exclusive ceremony and dinner on December 2 at The South Beach hotel in Singapore.
We thank all those who contributed their thoughts to these awards. The full list of write-ups appears in the December issue of AsianInvestor magazine, and more details of our decision-making process can be found here.
Markets category
Hong Kong/Taiwan
Cathay Life Insurance
Among home-grown Asian institutions, Cathay Life stands out for being global in its thinking and ambition with great infrastructure and good people. It deserves credit for the quality of its internal resources, decision-making and long-term vision.
Cathay Life has been among the most forthcoming in Taiwan to embrace changes in regulation to expand its investments. Owing to the need to take on more credit, duration and liquidity risk in the persistent low-yield environment, it sensibly moved to improve its risk control and portfolio analytics last year.
The firm believes in developing its internal capabilities to generate sustainable performance and has built a 220-strong investment team to manage $134 billion in assets. It has only outsources 16% of its assets to third-party managers.
It targets recurring yield within risk management parameters, with 81% of its portfolio invested in fixed income, real estate, mortgages and policy loans. Its holdings in emerging market callable bonds and high-yield credit are below domestic peers.
Cathay Life seeks stable income through diversification both in asset classes and geographies, and reaches for alpha from private equity, infrastructure, property and secured loans.
Its ambitions can clearly be seen from its acquisition of US-based Conning Asset Management. It has plans for further acquisitions to improve its capabilities and diversify, with Conning in talks to buy New York-based Octagon Credit Investors, which specialises in collateralised loan obligations, bank loans and high-yield credit.
Leveraging on this relationship, Cathay Life has established an interdepartmental asset modeling committee to take advantage of Conning’s expertise in asset-liability-management technology. This includes the development of projection models to evaluate future financial market scenarios and their potential impact on investment portfolios.
Of course, Cathay Life’s aggressive overseas allocation drive (55% of its portfolio today, versus 44% at end-2012) should not mask its contribution to domestic capital market development.
Its equity portfolio accounts for 1.5% of the Taiwan stock exchange’s market cap. Moreover, it plays a key role in communicating with the regulator to relax allocation rules so Taiwanese insurers can overcome negative interest spreads, with the onshore 10-year government bond yield (1.18%) lower than US 10-year T-bills (2.25%).
2015 winners already unveiled:
Institutional category
Reserves manager: Monetary Authority of Singapore
Insurance company (general account): Ping An Life
Public pension fund: Bureau of Labor Funds
Private pension fund 2015: Jardine Matheson
Endowment: National University of Singapore
Markets category