Spurred by Drive to Outsource, Insurance Asset Managers See Spike in RFPs in 2010

Investment managers are seeing an increase in the number of requests for proposals (RFPs) from insurance companies seeking third party services as the manager selection process evolves to meet increasingly complex investment needs.

(December 13, 2010) — Insurance asset managers are witnessing a higher volume of requests for proposals (RFPs) in 2010 as insurance companies retain third party expertise, according to a recent report.

David Homes, a partner at strategic consulting firm Eager, Davis & Holmes and Research Director for the Insurance Asset Outsourcing Exchange, has been tracking insurance companies’ use of third party investment managers including how they make manager selection decisions since the early 1990s, analyzing how insurance firms select managers. “We’ve seen that the insurance selection process has become more structured yet also more complex as investment needs have grown,” Holmes told aiCIO. He noted that the increase in the activity of RFPs reflects the heightened proclivity among insurance firms to outsource management.

According to Holmes, the spike in RFP activity leads to two conclusions. First, he said, with reasonable certainty, that the high level of insurance asset outsourcing seen in 2009 and 2010 will continue. Second, he expressed his confidence that insurance companies are more often using a structured RFP process when choosing a manager compared to the recent past. “Insurance companies are challenged by the current market and business environment,” Holmes asserted. “It’s become more apparent to them as a result of the credit crisis that they need expertise and resources that are not available internally.”

The study, sponsored by the Insurance Asset Outsourcing Exchange, showed that more than half (62%) of insurance asset manages included in the report are seeing more RFPs this year compared to 2009, while 30% report “about the same” level of RFPs and 8% report a decline. Furthermore, the study showed that insurance companies are increasing their use of investment consultants. “Because investment consultants typically use RFPs in the search process, they are contributing to the trend of increased RFP use,” explained Holmes.

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The Exchange-sponsored survey was based upon responses of fourteen leading insurance asset managers, including four of the top five and ten of the top fifteen ranked on non-affiliated insurance general account AUM.

Editors’ Note: The top five managers ranked on unaffiliated AUM are BlackRock, Deutsche Bank, General Re–New England Asset Management, Inc. (GR–NEAM), Conning, and Wellington Management. Source: Insurance Asset Manager.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742

Despite a relatively quiet year in 2010, the private-equity arm of the Caisse de depot et placement du Quebec plans to add to its private equity team to invest in Quebec companies.

(December 10, 2010) — Canadian funds are beefing up their private equity teams as they seek to increase investments at home.

The $16.4 billion Caisse de Depot et Placement du Quebec, Canada’s second biggest pension-fund manager, is planning on boosting staff at its private equity unit by around 25% next year as it pursues its mission to contribute to the economic development of Quebec.

Executive Vice President Normand Provost, who runs Caisse’s private equity unit, said during a speech in Montreal that the fund is looking to hire about 10 people next near in private equity, aiming to further expand investments in Quebec, which currently represent about one-quarter of the Caisse’s private-equity assets.

“We’d like to be busier,” Provost said during a meeting of the International Finance Club of Montreal, according to the Montreal Gazette. “If we’re less active, it’s not because that’s our wish. It’s because there were fewer opportunities. If enterprises that meet our criteria are looking for support, we’ll be there.”

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As of June 30, the Caisse’s private-equity holdings have included stakes in Quebec gas distributor Gaz Métro and Quebecor Media, the owner of cable operator Videotron.

Separately, new research has shown that employer-sponsored Canadian pension funds recorded their first decline in assets in more than a year in the second quarter. The figures, published by Statistics Canada, found company funds held assets of $928 billion at the end of the second quarter, down 0.7% from Q1.

Similarly, the Ontario Teachers’ Pension Plan (OTPP), which recently won aiCIO’s Industry Innovation Award for public pension funds with over $15 billion in assets, has boosted its in-house asset management to better compete for talent. “We are honored to receive this recognition,” Neil Petroff, Executive Vice-President, Investments and Chief Investment Officer at Teachers’, said in response to its win at aiCIO‘s awards event in early December. “We have a highly skilled investment team at Teachers’ who have helped build a reputation for innovative, in-house asset management that has long distinguished our investment program.”

“We were the first with a private equity direct investment team, and were among the first to invest directly in infrastructure,” OTPP spokesperson Deborah Allan told aiCIO, noting the Canadian fund’s position as a pension fund leader in direct investments. Further evidence of OTPP’s role as a leader in boosting its internal private equity team comes from the October 18 appointment of Jane Rowe, who assumed her position as senior vice-president of Teachers’ Private Capital, the private investment department of Teachers’.

To contact the <em>aiCIO</em> editor of this story: Paula Vasan at <a href='mailto:pvasan@assetinternational.com'>pvasan@assetinternational.com</a>; 646-308-2742