How YF Life, China Life are injecting innovation in managing portfolios
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In an industry not particularly known for embracing rapid change, two life insurers said they are taking measured steps to reform and improve their investment processes using emerging technologies and external service providers.
YF Life has been working to reform its investment processes, particularly for alternative assets, its Chief Investment Officer, Dennis Luk, said at AsianInvestor's 15th Insurance Investment Briefing on September 5.
YF Life
The Hong Kong-based life insurer has been creating practical solutions to manage a diverse portfolio of alternative investments efficiently.
"We've reformed our investment process to handle alternative asset classes with a lean team. While not super innovative technologically, we've developed our own operating model to handle the end-to-end investment process," Luk told the panel.
Internal and external resources both play a role in YF Life’s approach.
"We use external vendors to support the entire process, from fund onboarding to capital call handling and data conversion. This allows us to aggregate and analyse data, generating useful insights," said Luk.
The complexity of managing a diverse alternative portfolio is significant for many funds, each containing numerous underlying companies or credits.
“We've designed our own model to receive and handle data on a timely basis, generating the insights we want," Luk said.
Technology plays a crucial role in YF Life's investment process, which oversees around $10 billion in assets across various asset classes. The firm is partly held by US-based life insurance company, MassMutual.
"We use a tech platform to access look-through data and keep track of news. Working with vendors, we generate required reports within timelines to manage the large amount of data," said Luk.
"We've also built our own internal database to compare different funds and strategies."
He acknowledged that while these tools may not be groundbreaking innovations, they are essential for managing private asset portfolios effectively.
YF Life is also exploring the potential of AI in their daily operations while maintaining rigorous oversight.
"We're starting to use AI tools like ChatGPT and Copilot to help summarise quarterly reports and generate initial insights," he said. "We're careful not to trust them 100%."
CUSTOMISED REPORTING
Gene Miao, senior investment strategist at Churchill Asset Management, a boutique firm affiliated with US-based pension TIAA, highlighted the challenges of balancing standardisation with customisation in investor reporting.
Churchill Asset Management
Churchill manages approximately $50 billion on behalf of both TIAA and numerous third-party investors, focusing on alternative financing, credit, and equities in the US middle-market private equity ecosystem.
"From a reporting perspective, we have about 850 investors. Our standard reporting works for about 80% of them, but 20% require additional data in specific formats," Miao told the event audience.
The need for tailored reporting has significant implications for the company's operations and, to meet these diverse investor needs, Churchill has had to expand its support teams.
Even as new technology plays an increasingly significant role, Miao underscored the ongoing importance of human expertise in investment management.
"As a manager, we've had to grow our finance, administrative, and operations teams to provide timely and accurate data to our LPs and investors,” said Miao, referring to limited partners.
"It's a bespoke process that can't easily be replicated or abbreviated by AI at this point."
INSURANCE AND INNOVATION
"Insurance companies are not the most innovative in the investment industry, so we're still catching up," said Courtney Wei, head of investments at China Life Insurance on the same panel.
Wei heads the investment team overseeing $51 billion in assets, investing in all asset classes including both public and private markets.
China Life
Wei emphasised her firm’s proactive approach to staying informed about emerging technologies.
"We're working with some cutting-edge technology investors in the industry, those GPs working with AI, large language models, and their applications in various verticals," said Wei, referring to general partners.
“We're doing a lot of research and learning on that front.”
However, Wei also pointed out that insurance investors tend to invest in mature assets in the tech landscape. This conservative approach can be balanced with a forward-looking perspective, she added.
"We're waiting for the industry to mature a bit more so we can have decent exposure to these innovations."
Within the insurance sector, the increasing complexity of investments and regulatory requirements is another driver for technological upleveling, said Wei.
"Regulatory requirements are increasingly difficult, and the types of investments we're making are more complicated, so our systems and operations need to catch up."