This week in asset owner history: AXA Asia plans massive increase in alternatives

A decade ago this week, then-CIO of AXA Asia told AsianInvestor in an interview for the September issue of our print magazine that the insurer planned to increase its Asia allocation to alternative and foreign investments at the expense of equities.

The plan was to increase exposure to alternatives from around 1% ($120 million) to 7-8% of its $12 billion life insurance general-account assets over two years, said Arnaud Mounier, who was the Hong Kong-based regional chief investment officer (CIO) of AXA Asia at the time.

The firm aimed to diversify its portfolio and boost returns in the low-yield environment – a familiar story today.

The French insurer planned to increase its alternatives allocation to $800 million, roughly spread across property (4%), private equity and infrastructure (2%) and hedge funds (1%).

History repeated itself last year, when US Treasury real yields fell below 0% and institutional investors started veering into riskier assets such as high-yield bonds and alternatives.

In 2022, even as the Federal Reserve turned hawkish, alternatives continue to be popular amid volatile markets and uncertainty in the geopolitical arena.

A notable difference this time is the rise of private credit, which was not mentioned by AXA Asia in 2012.

Insurers such as Singapore’s NTUC Income and Sun Life Asia Pacific recently told AsianInvestor that private credit has become attractive for each of them, while other market practitioners have seen a rise in Limited Partner (LP) interest.

Richard Chan, the CIO of AXA Hong Kong told AsianInvestor earlier this year that the insurer would invest $1.4 billion in alternative assets in 2022, which makes up about two-thirds of new investments it will make this year. Over $900 billion would be deployed into alternative credit.

Looking forward, the trend towards alternatives is not likely to go away anytime soon, particularly as these asset classes often have years-long lockup periods – but that suits long-term investors such as insurers.