LONDON (Thomson Financial) - Generali Investments, the asset management arm of the Italian insurer, is eyeing a foray into third party management after 2008, according to one of the two deputy CEOs.
The expansion, which would see the fund management company go beyond the exclusive management of Generali's 250 bln eur assets, could eventually come about in response to institutional investors' demand for more sophisticated and specialised fund management.
Generali, although believing itself well positioned, will tread carefully: It will make a foray into third party asset management only after next year, after implementation of its 2006-2008 strategic plan, according to Heinz Gawlak, CEO of Generali's German fund management operations, AMB Generali Asset Management (AMGAM).
Following AMGAM's integration into Generali's new fund management structure earlier this year, Gawlak took up the additional post as deputy CEO of the combined division together with the head of Generali's French asset management operations, Philippe Lepargneur.
Gian Luigi Costanzo, chief executive officer of the Italian Generali Asset Management was appointed chief executive.
The new asset management structure, planned in the 2006-2008 strategy, has also allocated special responsibilities to its three main centres.
Italy is the group's competence centre for fixed income; Paris provides equities expertise; while private equity segment was allocated to Cologne. The plan however did not include any opening to third party management.
The decision to house private equity activities with AMB Generali AM was based on the division's decision to develop its private equity business in 2000 with a launch in 2002.
'It was a lucky decision because in that year the law governing how technical resources of insurance companies funds should be invested was changed, allowing investments in private equity. It had become clear that it makes sense in the long term,' Gawlak said.
In the same year, Generali committed 1 bln eur to AMB Generali Private Equity from the German insurance companies of the group.
Last year, the group announced the subsidiary would receive annual commitments of up 350 mln eur a year - although total investment in the asset classes would be limited to a maximum of 1.5 pct of the group's total assets.
'This (amount) will effectively make us one the major investors in private equity in Europe,' Gawlak said.
'We have seen demand for private equity from other institutional investors as they see there is diversification potential and realise the asset class should be part of a portfolio,' he said.
Gawlak said Generali was up to the challenge: 'We are good enough to offer our services to the third party in the future,' he said. Last year, Generali's private equity investments yielded about 12 pct returns and the deputy CEO expects double-digit returns this year as well.
'The complexity is how to structure a private equity product that can cater for the needs of an institutional investor. We have taken steps and have studied, for instance, ways to make a valuation that would satisfy auditors,' he said.
'We could step in and offer our services to medium size investment managers, who would also have to take these steps. But our priority for the time being is the management of Generali's capital,' Gawlak said.
'I hope Generali will put third party management in the next three year plan. The group is not yet terribly keen on it, but other insurers have bought asset management companies.
'Personally I am not convinced we should go the same way. Our strategy is more a like multi-boutique model, we do not need to buy large asset managers, it would be more useful to buy small to medium sized boutiques,' he said adding he had no specific boutique in mind as yet.
The executive said that Generali Investments is concentrating on 'spicing up' its core investment portfolios with alpha strategies such as tactical allocation.
'We will be active in picking the right investment at the right moment and we will be more focused on risk systems, using certain alpha strategies and private equity,' Gawlak said.
Creating this structure - building a successful alpha strategy to continue improving returns - will be the short-term focus, the deputy CEO said, but the concept of a move to third party business is hot on its heels.
'I am sure that the third party strategy will happen from 2008 onwards, and hopefully, Generali might want to invest more,' the executive said. By Cecilia Valente: +44 (0) 20 7422 4925; cecilia.valente@thomson.com cv/jad/jad/jfr COPYRIGHT Copyright AFX News Limited 2007. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News. AFX News and AFX Financial News Logo are registered trademarks of AFX News Limited
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