Institutional Excellence Awards: How Prudential HK impressed

AsianInvestor's 2022 institutional award for a life insurer - large (AUM of $50 billion and above) was awarded to Prudential Hong Kong. We explain why.
Institutional Excellence Awards: How Prudential HK impressed

One of the biggest insurers in Hong Kong, Prudential, continues to impress with its sustained commitment to improve overall operations and investment performance.

The company has improved portfolio efficiency, incorporated ESG principles more deeply into its investment strategy and implemented liquidity management platforms, all of which built resilience in the  turbulent market conditions of 2022.

With improved data analytics, the firm is able to access daily holdings and preliminary performance of portfolios, building on previous years’ efforts to enable quicker investment insights.

To combat liquidity and sentiment shifts, the insurer developed a systemic liquidity monitoring framework with an eye to injecting transparency into current and potential liquidity needs.

Those efforts have helped Prudential Hong Kong reduce cash drag while improving liquidity management - something that has proved to be especially important in light of the liquidity squeeze UK pension funds faced in 2022.

Efforts to enhance environmental, social and governance reporting and improve Prudential’s sustainability engagement continue at full speed as well.

The Hong Kong entity has a task force and Head of Investments Fanda Ho is one of the key members, looking after the ESG aspect of investments. The task force consists of experts across various product and operational divisions in the organisation.

Ho told AsianInvestor that Prudential Hong Kong incorporates ESG considerations across the entire investment process, starting with the due diligence process for investment managers.

It’s no surprise then that ESG considerations are applied when the insurer awards segregated mandates or initiates new investment guidelines.

“Some manager mandates have more advanced ESG requirements, such as year-on-year carbon emission targets, and incorporating Sustainable Development Goals into the investment objectives,” Ho said.

Prudential Hong Kong also switched from broad market benchmarks to ESG or climate indices for some mandates, demonstrating its dedication to ESG principles and climate change goals set by the parent group.

Its portfolio diversification strategy more recently has included introducing passive strategies as well as bringing in ETFs tracking ESG-tilted or climate indices, instead of the traditional broader benchmarks. It has switched some underperforming funds into passive funds, resulting in lower volatility, higher information ratio, lower costs while also aligning with the group’s ESG goals.

The insurer maintains a dynamic investing strategy, which allows it to switch to a defensive position if required, based on market conditions. It constantly monitors its overall portfolio to assess where it can take more active risk and where it might be harder to outperform, Ho said.

Prudential previously also said it implemented the Aladdin fund platform and had worked with the BlackRock team to tailor it to the insurer’s bespoke requirements.

The combination of passive and active management has helped the large insurer improve overall stability in investment performance – no mean feat in turbulent market conditions.

All of these initiatives enhance Prudential Hong Kong’s abilities as a sophisticated investor, even as it continually improves its ESG credentials and operating efficiencies.


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