European asset managers owned by insurers are falling behind their standalone peers. They oversaw 14 per cent of industry assets under management in 2020, according to consultancy Oliver Wyman, down from a fifth a decade prior. In a fast-growing industry that is a lot of forgone euros: an additional €4tn, had they maintained their 2010 market share.
Ostensibly, fund managers owned by insurance companies benefit from a large captive market. Europe’s insurance groups have a €10tn pool of assets to invest. But that has attracted independent fund managers, both those with scale and those offering niche areas such as private debt.
Competition is fierce for the assets managed by the 100 biggest European asset managers. The total stood at €65.7tn in 2020, not far off three times that of 2010.
The insurance industry itself is moving away from the old guaranteed policy business towards more lucrative unit-linked investments. Here, the UK leads the way: in 2020 all but 5 per cent of the €162bn in annual life policy premiums were unit-linked versus around a third in France and Italy.
That has put more focus on DIY investment platforms such as Interactive Investor, or those for investment advisers. Pricing is keen — this after all is the sector’s competitive edge — and passively-managed funds feature high on investors’ shopping lists. Other than Legal & General, that rules out many of the insurers’ asset management arms.
These asset managers face other constraints. The supply of assets to offset insurers’ longest-term liabilities, such as infrastructure, is limited and can be expensive. Fixed income — another favoured investment — has vulnerability to negative real rates. Yields have compressed and regulators — wary of the temptation among asset managers to push boundaries — are clamping down.
Yet insurers with investment arms, including Aviva and Germany’s Allianz as well as L&G, are unwilling to jettison them. Bosses who like running big businesses claim they offer a competitive edge and, potentially, a growth driver. They should be under no illusions, however. The going may get tougher for in-house investment management subsidiaries.
This note has been amended to correct to €4tn
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