Companies

Investment innovation of the year: Aberdeen Standard Investments

This year, Aberdeen Standard Investments (ASI) launched a pioneering solution for insurers. The strategy works alongside banks and participates in loans to private-equity funds in the early years of their life cycle.

These loans are short duration and investment grade as determined by ASI using a proprietary rating model for this asset class. The strategy is designed to provide insurance clients with a better return on their assets while maintaining a low level of credit risk.

The solution was developed in collaboration with UK life insurer Phoenix.

"The strategy answers a real need that has arisen following the implementation of the Solvency II regulations," global head of insurance Stephen Acheson at ASI said. "Now the regulations are fully embedded, insurance companies need to identify assets that can both generate a good level of income and enable them to comply with the requirements of Solvency II."

To allow the new solution to be included in Phoenix's internal model, ASI developed a new credit-rating model for the asset class. This involves scoring and rating each of the underlying private-equity funds, an assessment seen as too niche for the major credit-rating agencies.

ASI's global head of private markets Peter McKellar said the solution "can capture private market illiquidity premia and is tailored to helping insurers achieve their financial objectives, particularly with the establishment of a credit rating methodology that enables us to determine credit risk".

Judges praised the strategy ability to enhance returns and noted that it was one of the rare solutions out there for "Solvency II friendly" investment in private equity.

Investment innovation of the year (highly commended): Mirova, Natixis Investment Managers - Sustainable Oceans Strategy

Although Mirova, the sustainable investment arm of Natixis Investment Managers, missed out on the top prize, judges highly commended its sustainable oceans strategy.

The strategy, launched in 2018, includes the creation of a new investment fund dedicated to making pioneering impact investments into marine and coastal projects.

Investments made through the fund aim to create investor value and social impact by providing growth capital to companies that harness the ocean's natural capital. Mirova's ambition is to deploy at least $100m across a portfolio of investments into sustainable marine activities in developing countries globally.

The strategy includes investing in scalable, impact-aligned models that generate real assets, build resilience in coastal ecosystems and create sustainable economic growth and livelihoods. It seeks to generate returns through originating, structuring, and providing transitional finance via targeted project lending into sustainable seafood production, seafood supply chains and coastal development projects.

These projects support a transition to environmental and social sustainability and underpin 'the Blue Economy'. Through the sustainable oceans strategy, institutional investors can help improve sea health and create marine-focused jobs while earning market-based investment returns.

At launch, the fund attracted investment from the European Investment Bank, Axa Investment Managers and Dutch development bank FMO, among others.

Judges commended the innovative aspect of the fund in the currently hot topic of sustainability investing. Although it is not specifically geared towards insurers' investments, judges said they were looking forward to seeing how the fund would perform in coming years.

Investment strategy consultant of the year: EY

Understanding and identifying the right investment strategy for a single insurer requires a detailed understanding of its undertakings and objectives. Providing such a service to a large roster of companies spanning the full range of the insurance sector is an altogether different challenge.

Whether advising insurers on the likely treatment of equity release mortgages in regulatory revisions or identifying appropriate sources of long-term funding to match liabilities, EY's investment advisory team has continued to offer guidance to insurers across a wide spectrum of issues.

Drawing on the expertise available across the firm, including the capital optimisation team and global network of asset management specialists, the team was able to cater its insurance advisory offering to meet all of its clients' requirements.

Notable achievements over the course of 2018 included assisting a UK life insurer in developing its approach to environmental, social and governance factors. For that client EY produced a benchmarking report on how its peers had performed and advising on one of the largest investment outsourcing deals of the year.

EY also played a role in advising the government on the securitisation and subsequent sale of student loan books.

The team also advised insurers on how regulation such as Solvency II and IFRS 9 and 17 affected their investment strategies.

Identifying EY as a clear leader within the category, the judges praised the depth and scope of the services that it was able to provide its insurance clients. They highlighted its ability to dig deep into unique issues such as equity release mortgages.

Responsible investor of the year - manager: DWS

From combatting climate change to ensuring greater diversity in organisations, the need for insurers and their asset managers to account for environmental, social and governance (ESG) factors within their investment decisions has never been greater.

With current voluntary initiatives such as the Taskforce on Climate-related Financial Disclosures (TCFD) set to be joined by regulations from the European Commission and the UKs Prudential Regulatory Authority, to name but two, insurers who take a proactive approach will likely fare best.

With its 20 years' experience of sustainable investments now enhanced with a trading and portfolio management platform that fully integrates ESG performance across portfolio managers, DWS has put responsible investing at its core.

Managing roughly €30bn of assets through its dedicated responsible investment strategies and accredited by the UN Green Climate Fund, DWS routinely assesses the carbon footprint of its portfolios while assessing green sovereign bonds against its bespoke ESG metrics.

With both its chief investment officer for responsible investments and head of responsible investing reporting into its global client group, DWS ensures sustainability is factored in at the highest levels.

Mark Fehlmann, head of European insurance coverage at DWS, said: "In Europe in particular, insurers are fully embracing ESG and integrating related considerations on both sides of the balance sheet and we are proud that the market recognises the pervasive integration of ESG in all aspects of investing at DWS."

Describing it as one of the first to value ESG, the judges praised DWS's quality research and continual pursuit of innovation.

Fixed income manager of the year: Insight Investment

Accounting for the bulk of insurers investments, fixed income is the most critical of asset classes when it comes to matching liabilities with assets. But with ongoing concerns over interest rate rises and the end of the credit cycle looming large among insurers investment outlook, finding the right manager can be tricky.

From active government bond strategies to emerging market debt portfolios, Insight Investment provides a diverse range of fixed income strategies that cater to the varied liability-matching needs of different types of insurer.

Through the development of specialist modelling tool AYLA, which builds on the standard credit-review process, Insight Investment has made the process of constructing buy-and-maintain portfolios both more effective and efficient.

The tool also enables the firm in supporting its clients' mandates with full Solvency II-matching adjustment compliance.

With an investment team of 116 fixed-income professionals managing £127bn, it provides clients with both the scale and expertise to maximise returns across corporate and index-linked bonds, money markets and foreign exchange derivatives.

"Insurers need investment strategies that are designed to suit their liability profiles, and which incorporate regulatory constraints, while retaining flexibility to deal with changing economic conditions," said Heneg Parthenay, head of insurance at Insight Investment.

"Our dedicated insurance specialists have helped our clients do this for many years, making the most of our expertise across both fixed income and financial solutions."

Noting that it exceeded its benchmark in most instances, the judges praised Insight Investment for having both a well defined investment process and a good understanding of the liability driven investment restrictions that insurers face.

Equity manager of the year: Morgan Stanley Investment Management

In the current low-yield and complex regulatory environment, the search for alpha is increasingly important for insurers. In order to incorporate these new criteria, especially in mandates where the solvency capital requirement is a constraint, Morgan Stanley Investment Management (IM) established an interdisciplinary effort between its portfolio management teams and dedicated insurance specialists.

In particular it has developed a global opportunity strategy managing highly differentiated, concentrated portfolios that invest across geographies, sectors and market capitalisations. The strategy seeks long-term capital appreciation by investing in high-quality companies that the investment team believes are undervalued at the time of purchase.

The investment process integrates analysis of sustainability with respect to disruptive change, financial strength, environmental, social and governance externalities; and fundamental analysis of competitive advantages that can be monetised through growth.

Morgan Stanley's portfolios are concentrated in its highest conviction ideas. The firm seeks to hold 30 to 45 positions with its top 10 holdings generally accounting for 50% of the portfolios. The result is a suite of portfolios that look very different from the benchmark, with active share generally 90% or higher, and tracking error ranging from 5 to 10%.

Richard Sarsfield European head of insurance solutions at Morgan Stanley IM said: "the Global Opportunity equity fund which, in the 12 month period ending 30 September 2018, produced outperformance of 9.12% against the benchmark, net of fees. The Team headed by Portfolio Manager Kristian Heugh, has been managing money since 2006. As of 30 September 2018, the team managed £14.6bn in the strategy, of which approximately £1.2bn is managed on behalf of our global insurance clients."

Multi-asset manager of the year: Columbia Threadneedle

Columbia Threadneedle has a long history of delivering excess returns through asset allocation. In 2012, Toby Nangle, head of global asset allocation joined the company to develop this capability and the EMEA multi-asset team now comprises 10 people.

Last year saw the fifth anniversary of the firm's flagship fund Threadneedle Dynamic Real Return Fund (DRR), having delivered an annualised return of 5.4% (gross of fees, as at October 2018) since inception with around 45% the volatility of equities.

With the dynamic real return strategy, Columbia Threadneedle's goal is to deliver consistent performance, even in times of market volatility. Rather than constrain its opportunity set, each position needs to earn its way into the portfolio from a return and risk perspective.

The firm believes that having this ability to restructure its portfolio actively is key to navigating the current environment and ultimately delivering a smoother overall investment ride.

The strategy is actively managed, dynamic, diversified and cost effective. It is designed to deliver risk-adjusted capital growth of inflation (CPI) plus 4%, with less than two-thirds the volatility of equities.

To continually improve, Columbia Threadneedle has asked itself the question: "Did we demonstrate asset allocation skill and how can we evidence this?".

It found that at times it had identified the most beneficial risk category and, on the majority of occasions, a better-than-average mix of asset classes to produce strong returns. However, it also found that in some periods it could have taken more risk.

This it said will not change the firm's thought process or the way in which it manages the assets, but it will help it reflect on whether it is being too conservative in times of stress.

Judges praised the firm's internal reflective analysis.

Alternatives manager of the year: Aviva Investors

As global insurers seek to diversify their portfolios away from traditional assets, the alternative investments market has become increasingly in demand. From Asian life insurers to European P&C's, the yield delivered by investing in private equity and real assets holds strong appeal and is showing no sign of losing its lustre.

Describing this growing trend, this years' winner, Iain Forrester, head of insurance investment strategy at Aviva Investors, said: "The low-return environment in recent years has intensified insurers' search for investment diversification, particularly in respect of alternative income."

From real estate long-income to private corporate debt, and many things in between, Aviva Investors provided dedicated offerings that cater to the specific requirements of its parent and other insurers investment needs.

An illustration of just how they go beyond-the-norm to meet insurer client needs can be found within the Structured Finance team.

Tasked with delivering an investment for a matching adjustment portfolio, the team originated a term lending facility that was secured through a revolving pool of short-dated supply chain finance.

Further differentiation is found through its 'unlevered approach' to infrastructure equity. Taking on full control for the transactions, it bypasses the need for competitive auction processes and give clients direct access to the investments best fitting their needs.

Commended as offering cutting edge investment and impressive pedigree within the asset class, the judges were particularly impressed with the breadth of resources and expertise that Aviva Investors dedicate to alternative investment strategies.

Real asset manager of the year: AXA IM

Established 30 years ago, AXA IM - Real Assets is currently the largest real estate portfolio and asset manager in Europe, with £75bn in AuM.

"A rising rate environment, combined with continued uncertainty around trade and broader political risk, has the potential to lead to greater market volatility into the medium term," Andrew Douglas, Insurance Relationships AXA IM says. "Real Assets have the ability to provide an attractive alternative solution for our insurance clients, through stable and predictable income to negate balance sheet volatility."

AXA IM provides a broad real assets offering across various sectors, geographies in private or public markets, equity or debt, Douglas continues.

"Size tends to be an advantage with the ability to source attractive deals and deploy capital effectively in the market. Asset managers remain well placed to fill the gap left by regulatory and capital constrained banking institutions, and deliver attractive real asset solutions for insurers."

Beyond the strong AuM, judges commended Axa IM's breadth of investment expertise and the willingness to invest further into remaining at the top of the league table.

Judges also noted the firm's impressive list of achievement in 2018 which included the completion of £8bn of transactions in 2018; £3.5bn in acquisitions and £4.5bn in disposals.

Total YTD capital raising in 2018 stands at £5bn. YTD in 2018, AXA IM – Real Assets has raised a total of £2bn in capital for debt strategies, including c. £1.5bn in CRE debt and £500m in Infrastructure debt.

The firm's focus on environmental, social and governance (ESG) criteria in its investment process also didn't go unnoticed by the judges, which hailed AXA IM as a long-standing supporter of sustainable finance.

Private debt manager of the year: M&G Investments

The low rates environment weighting on insurers' minds in the last few years has resulted in a gold-rush like search for yield. Consequently, insurers appetite to look beyond the public markets and capitalise on private debt opportunities has increased.

As one of most experienced players in the market, having led the way on senior loans and private placements, M&G Investments provides clients with both the expertise and experience to make the most of its potential within the asset class.

Having started out more than two decades ago, the investment arm of global insurer Prudential has built itself to be the second largest private debt investor in Europe, and the seventh largest globally, with 40% of its total assets under management now drawn from external clients.

By focussing on the fundamentals of high-quality credit research and a patient, value-driven investment strategy, the function has consistently delivered its clients with long-term outperformance.

With a long-line of deals in the social housing and long-lease property sectors, coupled with multi-asset pooled solutions, M&G Investments provides a range of offerings to meet client demands, while the Inflation Opportunities Fund and Illiquid Credit Opportunities Fund provide an alternative means to enter the market.

Strongly praised for its diverse product offering, the judges cited a strong track record and good performance in 2018 as key reasons to attribute M&G Investments with this award. In particular judges were impressed with the way M&G Investments has weathered the reduction in yield with fine active security selection.

Private debt manager of the year (highly commended: Pemberton Asset Management

Established less than six years ago, Pemberton Asset Manager has quickly risen as a leader in the private debt market and is showing no signs of letting up.

Taking the top spot in the category at last year's awards, they followed up with another impressive entry that came as close to securing a second successive victory.

With its mid-market centred approach to investing, Pemberton focuses on companies with EBITDA between €10m and €75m. The asset manager delivers diversification and extra coupon to clients while preserving credit terms. Counting a number of major European insurers among its clients, and 40% owned by Legal & General since 2014, it is seen as a credible, long-term partner by its clients.

Over the course of 2018, it raised roughly €3.5bn and committed €2bn through a total of 28 transactions across the European market.

Capitalising on its previous year's successes, Pemberton broke new ground with the launch of its Strategic Credit Opportunities Fund to provide senior to mezzanine financing, while the Trade Receivables Fund expanded its provision of working capital to mid and upper mid-market companies.

Providing clients with full credit transparency and a clear understanding of the intricacies of local markets it once again proved a key partner to the insurance sector.

Praising it as young and agile, the judges described Pemberton's performance over 2018 as impressive and identified its well structure credit analytics team as a particular strength.

Individuals

CIO of the year: Robert Vaudry, Wesleyan

Since joining Wesleyan in February 2017 to head up the investments team, chief investment officer Robert Vaudry has transformed the firm's strategic approach and working culture.

This has resulted in an improvement of fund management practices and processes, and ultimately secured the potential for stronger performance. He has also made significant changes to the investment policies, in particular through the integration of environmental, social and governance (ESG) criteria.

The Birmingham-based mutual provides financial services for doctors, dentists, teachers and lawyers. It manages or administers close to £8bn of assets.

Vaudry said: "Since day one in my role, my aim has been to ensure that our fund managers and analysts continue to deliver the best possible returns for our clients, who are some of society's most trusted professionals, but to also raise our profile with them, Wesleyan's financial consultants, and the wider world." After quickly embedding internal team improvements and gaining their support, Vaudry championed a programme of marketing and outreach activities featuring Wesleyan's fund managers and analysts, to improve investments knowledge and engagement levels among clients and colleagues (primarily financial consultants for the latter group).

Through multichannel communication projects, covering face-to-face, digital and offline activity, he and the wider team have been able to meet the insurers' customers, share knowledge and gain a real insight from those who choose to invest with Wesleyan.

Martin Lawrence, investment manager at Wesleyan, said: "The energy and passion that Robert has brought to us over the last 18 months has been invaluable. In a relatively short space of time, he has made exceptional progress in helping Wesleyan's financial consultants and, importantly, our clients to have a much greater understanding of what fund managers and the wider team strive to achieve on a day-to-day basis."

Judges were convinced by the evidence of Vaudry's impact and influence on Wesleyan. In particular they noted how he had improved communication and understanding of the investment offering with clients and advisors.

Young professional of the year: Neo Mooki, Aberdeen Standard Investments

Leading on the management and investment of £50bn of client capital would be responsibility enough to occupy many of the most competent professionals within the investment world, but not for Neo Mooki, investment director at Aberdeen Standard Investments (ASI).

In the hours when she wasn't developing innovative and efficient capital solutions for Aberdeen Standard Investments' key client Phoenix Group, she was putting the finishing touches on an MBA from Oxford University, where she was awarded a distinction in 2018.

Establishing and implementing a fund financing solution for Phoenix over the course of 2018, she pushed the envelop further to introduce an investment vehicle that gave retail investors access to private markets aligned to the UN sustainable development goals, and is continuing to identify further opportunities to develop impact investing.

With a passion for making investments deliver benefits beyond financial returns, She has also played an advocacy and advisory role with start-ups, governments and development institutions.

In 2018, she was invited to deliver the keynote address at the Global Expo Botswanna, a business to business multi -sectorial expo, which the year before had been bestowed upon Sir Richard Branson.

Drawing on her many and varied achievements over the course of the year, Stephen Acheson, global head of insurance at Aberdeen Standard Investments, said: "None of these innovations would have happened without Neo's ability to reconfigure roles and relationships in order to mobilise value creation. Neo is a credit to ASI and to the wider industry."

Described by the judges as very impressive and a leading figure within the investment world, Mooki, who became the first black woman to hold a lead investment relationship role for strategic clients at ASI, is clearly on her way to even more impressive achievements.

Teams

Investment team of the year – insurer: Phoenix, Financial Management Group

Since mid-2017, Phoenix's financial management group (FMG), which is charged with developing the group's investment strategy, secured the sourcing of roughly £2bn of private illiquid assets which constituted a tripling of its previous allocation. This enabled the group to return £300m in cash to shareholders in the first half of 2018.

"FMG has led Phoenix's direct sourcing of illiquid assets which is integral to our corporate strategy. FMG has built a strong reputation for clarity, integrity, prompt feedback and openness," said Scott Robertson, head of FMG at Phoenix Group.

"The success of this approach can be demonstrated by the diversity of the origination in 2018, over 20 private deals, five times more than 2017, across different sectors and structures including forward starting, CPI linked, wrapped issuance and amortising structures," he added.

Other key moments across the year included the hedging of shareholder exposure through the Standard Life deal to generate capital synergies of £400m and harmonising the investment strategy of Phoenix and Abbey Life to deliver a further £200m in cash.

Those achievements, along with providing support to the wider Group's entry into the Bulk Purchase Annuity market, are made all the more impressive by the fact that the FMG function only received its first mandate to source private assets just over 18 months ago.

Praising FMG for delivering added value to shareholders amid the challenging background of the Standard Life and Abbey Life transactions, the judges were impressed by its strong performance.

Investment team of the year – asset manager: Aviva Investors - Structured Finance team

Recently, some of Aviva Investors' most innovative work has been in alternative income, where it originates and manages private assets that meet the specific requirements of its clients.

The structured finance team at Aviva Investors has been originating assets since 2012. The team has £3.1bn ($4bn) of assets under management as at September 2018 and has successfully completed 40 transactions in the last six years.

These deals require extensive cross-team collaboration and careful structuring. The outcome has been the successful capture of illiquidity premia for its clients.

This year, Aviva Investors has identified opportunities in areas once dominated by banks. These include offering term financing to vehicles holding senior debt, with similar security to the senior tranche of a collateralised loan obligation in a more bespoke transaction.

Aviva Investors has also financed short-term receivables, structuring the facility to be eligible for the Solvency II matching adjustment, and restructured derivatives in swap repacks, helping enhance risk-adjusted returns for insurers.

Judges praised the innovative approach of the firm to bring opportunities in new asset classes to clients. This is particularly welcomed as non-traditional asset classes are of increasing importance to insurers.

Judges also commended Aviva Investors for addressing matching adjustment eligibility issues and enhanced risk adjusted returns. They were convinced by Aviva Investors' demonstration of its ability to help insurers in their most critical gap: finding good assets that meet regulatory criteria at attractive pricing levels.