"We have to keep the Allianz investment portfolio safe and solid"
by Allianz SE
The ongoing sovereign debt crisis, volatile equity markets and low growth are giving investors a rough time. Nikhil Srinivasan, Chief Investment Officer for Allianz Investment Management (AIM), has to make sure the funds of Allianz customers, particularly for life insurance, are invested safely to provide a maximum return. Quite a challenge in today's environment...
Others in this interview series have talked about the sovereign debt crisis as a major challenge for 2012. As Chief Investment Officer at AIM, how do you see the situation?
Nikhil Srinivasan: The debt crisis in Europe in particular is a unique situation, since no single country in the euro zone has control over its own monetary policy. I think the austerity program agreed to at the beginning of February makes sense, but that will take time before it bears fruit.
So the main goals right now should be getting the rescue facilities fully implemented. Also, the countries of the euro zone should try boost demand, since consumption is too low. However, no matter what, it will take a few years before Europe fully stabilizes.
How does this affect your thinking as Chief Investment Officer at AIM?
Srinivasan: AIM has to keep the Allianz investment portfolio safe and solid. There are millions of customers depending on that. Right now we are working to expand our investments outside government and corporate bonds. So, we've been examining some options we hadn't considered in the past. Our focus is still mainly on Europe because that is where most of our business is, but we are looking at new types of investments.
Like what for example?
Srinivasan: A main area is our new credit department that works as a lending desk. They invest in asset-backed loans with returns at between 5 and 7 percent. We want to build that up in the next few years. But we are not rushing into anything. There are lots of investors ready to accept low returns, and we want to take the time to make sure we get the most for our money.
What kind of loans have you been making?
Srinivasan: We've made loans for commercial real estate in Germany and France, and we have developed our capacity to finance residential property as well. Then there's infrastructure. You may have read about the Allianz equity investments in infrastructure like the Norwegian gas transport network.
What share of your portfolio will asset-backed loans have?
Srinivasan: There are no numerical targets. It's a matter of getting the right deal. But in, say, three to five years we could double the weight asset-backed loans have today, which is currently about three percent of our overall portfolio. But I want to grow our portfolio in other areas as well. Those would include investments in more liquid assets such as bonds or shares in emerging markets in regions like Asia as well as funds focused on illiquid assets in various regions.
What needs to happen to make 2012 a good year for you?
Srinivasan: Allianz is a long-term investor, very long-term. So it isn't just about 2012 but rather where you can expect growth or reliable returns for many years.
Emerging markets in Asia and South America look set to grow this year, if slightly less strongly. The main issue is for the biggest economic areas of Europe and North America to get sorted. I'd like to see more stability in the euro zone, which will require patience from markets and creativity from governments. Also, these first signs of renewed economic health in the US need to continue and show more vigor. However, both Europe and the US need to tackle their fundamental structural problems, which will require policy makers to look beyond 2012 – or even 2013.
About Nikhil Srinivasan
Born in India and a naturalized Singaporean, Nikhil Srinivasan was educated in the U.S. and the UK. He joined Allianz in 2003 and prior to coming to Munich in January 2011 was the regional Chief Investment Officer for AIM in Asia, based in Singapore where he was also concurrently the Chief Investment Officer for AGI Asia Pacific and CEO of AGI Singapore. Srinivasan started his career in Asia in 1994 and was a banker and money manager for firms including Morgan Stanley.