How Income Insurance selects external managers
Singapore’s Income Insurance values external private credit managers with strong in-house operating and restructuring capabilities, as it ramps up exposure to the alternative asset.
“We try to invest in managers that have some in-house restructuring or operating capabilities, so that in the event where they have to take over portfolio companies, they can do that,” said Agnes Chew, senior manager of external fund management, investment at Income Insurance.
In today's volatile markets, managers with expertise in restructuring distressed situations will stand out, she told AsianInvestor’s Insurance Investment Briefing in Singapore on September 3.
Chew focuses on allocating to alternative fund managers across private equity, real estate, and private credit - a relatively new allocation the insurer started three years ago.
Income Insurance is most active in private credit within private markets to benefit from lower risk charges and higher income.
Chew highlighted the importance of continuous deployment to diversify across vintages, geographies, strategies, and manager sizes to avoid investment in large players with similar portfolios.
“Private credit, especially senior direct lending, hasn't really gone through a down cycle. [When I am] going through many managers, almost everyone has really low default rates and low loss rates. So, maybe we will go through a cycle, and then we will see who are the better managers that emerge,” she said.
At the end of 2023, Income Insurance had $43 billion in assets under management.
It leverages private markets to tap into illiquid premiums and generate higher returns compared to its public market exposures. This is primarily done through fund vehicles, with some direct real estate assets and private equity co-investments.
German insurer Allianz recently announced an agreement to acquire a 51% stake in Income Insurance.
TRACK RECORD IS KEY
On manager selection, Chew values both the track record of managers and the teams behind them.
“Ideally, we want as long and consistent a track record as possible,” she said. “We do have a feeling that in private markets, the track record is generally more replicable than in the public markets.”
She prefers managers with multiple funds across vintages and economic conditions, and who are top performers within their own vintages.
The insurer also looks for managers with stable teams, where people from previous vintages remain involved and continue to work together for an extended period, whether at their current firm or a previous one.
“We try to look at how long the team has been working together, the longer they are, whether in the current firm or the last firm, the more ideal - maybe they will stick around for longer,” she said.
ALSO READ: Income Insurance to add to private credit amid sliding rate outlook
Income Insurance also assesses whether incentives or carry are broadly distributed within the team or concentrated among a few senior individuals, and whether these incentives align with the interests of fund investors.
The insurer sometimes evaluates investment structures or tax considerations for specific fund vehicles, such as whether the manager has a structure in place that minimises taxes for Asian limited partners (LPs) investing in developed markets.
VOLATILITY HELPS
So far, Income Insurance’s watch list of external managers has expanded significantly, and Chew hopes market volatility will help identify the standouts.
At the same time, she seeks out stressed sellers, such as LPs facing liquidity needs or GP continuation funds.
ALSO READ: Allianz-Income deal followed talks on all-Singaporean tie-up
As the insurer typically invests in private market through funds, Chew noted sourcing deals is generally not difficult, especially given the current challenging fundraising environment.
For investments in the US and Europe, the managers who approach Chew tend to be larger ones with investor relation teams or offices in Asia. This usually leads to promising investment opportunities.
However, she said direct and co-investment opportunities could be more difficult to access.