Thai Life lays out allocation revamp

Insurance firm Thai Life is in the process of awarding its first multi-asset mandates to two international firms and will look to hire external managers as it expands its corporate bond portfolio, AsianInvestor has learned.

The firm, one of Thailand’s biggest life insurers with around $7.5 billion in assets under management, has set out to raise its equities exposure and more than treble its alternatives allocation over the next few years in a concerted portfolio shift.

Arj Seriniyom, who joined Thai Life this year as its head of investments, said that it planned to launch its first unit-linked products, was considering providing financing to corporates for yield purposes and wanted to expand its internal investment team.

In an interview with AsianInvestor in Bangkok, Arj noted that about 20% of its equity allocation was in foreign stocks, compared with around 10% just a year ago.

For the past decade it has been using foreign investment funds to access international markets. However, earlier this year industry regulator the Office of Insurance Commission (OIC) granted Thai Life approval to invest overseas directly.

Arj confirmed it was now seeking to increase its exposure to exchange-traded funds (ETFs). At present it uses ETFs listed in mainland China, Hong Kong, Europe and the US.

Thai Life has just 1.2% of its portfolio, or $80 million, outsourced to external managers. Four local equity firms are managing segregated mandates, serving to diversify its portfolio and to provide a benchmark for its internal fund performance.

While Thai Life does not outsource management on the fixed income side as yet, Arj said it would be looking to hire external bond managers as it strives to increase exposure to investment-grade corporate debt, both locally and globally. “We are looking at hiring external managers for our fixed income portfolio,” he said.

He added the firm was moving into multi-asset products with two global managers for the first time. “We have not made a decision on the managers yet, but we would like this to be a liability-driven mandate to match our liability profile,” he said.

While he said Thai Life would start small in allocation terms with a tenor of five years, he noted the firm’s process with external managers was to test the water in this way, potentially raising allocation up to $200 million depending on performance.

Overall the firm has set out to reduce fixed income exposure to 85% of its portfolio in the near-term, from 98% previously, while allocating 10% to equities and 5% to alternatives.

Arj said Thai Life had been allocating to alternatives for the past year, mostly private equity and hedge funds, although it has some exposure to domestic real estate investment trusts (Reits). He noted the firm was interested in infrastructure funds and was open to different maturities.

Furthermore, it plans to invest more in structured notes in credit and interest rates, having pulled back from those instruments in 2008, and was studying opportunities to provide financing to corporates as an additional yield play.

Thai Life has 10 investment staff at present, equally split between equities and fixed income. The equities team also oversees alternatives. “We are looking to expand the team and do more in-house investment,” stated Arj.

The firm uses derivatives to hedge interest rates and foreign exchange via a separate risk management department. Arj said it was also planning to launch unit-linked products. “We’re looking at selecting managers for these now and aim to launch the first ones this year,” he explained.