Interview | Li Wei of China Re Asset Management: Insurance asset management has changed from "managing assets" to "serving customers", and it is necessary to improve the ability to supply products

As a first-class asset management institution in China's asset management industry with a history of 18 years of development, insurance asset management institutions that manage more than 200,000 funds are facing more open and market-oriented competition, and they also need to continue to advance.

In the process, the head of each insurance asset management company has to answer a series of questions. What is the situation facing the industry? What is the future competitive landscape? Where are the opportunities for yourself? How to position, how to break through, what is the landing path? ......

Recently, Li Wei, Secretary of the Party Committee and General Manager of China Re Asset Management Co., Ltd. (hereinafter referred to as "China Re Asset"), was interviewed exclusively by the Chinese reporter of Securities Times and Securities Company to give his answers to these questions.

 

Li Wei, Party Secretary and General Manager of China Re Assets

Founded in 2005, China Re Asset Management is one of the first insurance asset management companies established in China and the only reinsurance asset management company, and currently entrusted with about 300 billion yuan of funds in the re system. Li Wei has rich experience in both the liability side and the asset side of the insurance industry, which is the first time he has spoken out since he became the general manager of The New China Re Asset Management this year.

The financing needs of emerging industries are highly matched with the long-term nature of insurance funds

Brokerage China reporter: This year is the opening year of the "14th Five-Year Plan", the development of emerging industries in the new era has become more critical, how can insurance asset management help emerging industries?

Li Wei: To achieve high-quality economic growth during the 14th Five-Year Plan period, we must rely on economic transformation and upgrading and the development of emerging industries, and we must form sustainable innovation capabilities and industrial transformation capabilities in the "card neck" technology and related fields. These fields, industries, enterprises and business developments often have the characteristics of "technology-intensive" and "asset-light", and the financing needs are highly compatible with the characteristics of the capital market and the long-term characteristics of insurance funds.

We believe that insurance asset management actively integrates into the competitive pattern of large asset management, consciously promotes the function of "asset intermediary", and changes from the traditional "asset owner" and "resource allocator" to the active provider of value to the society and the active manager involved in corporate governance and risk management, which can better serve the demand for funds in the real economy, open up the channels of the real economy and capital supply, and improve the long-term mechanism for converting savings into equity investment, which is a higher level of social responsibility and social value.

Specific to supporting the development of emerging industries, insurance asset management can be promoted from several aspects:

The first is to comprehensively use industrial funds, private equity direct investment and various insurance asset management products to serve the innovative development of high-tech industries, take the initiative to dock new investment opportunities for industrial structure transformation and upgrading in key areas, and provide full-life cycle financial services for various types of innovative enterprises on the emerging technology ecological chain.

The second is to actively serve the national regional strategy, take the initiative to dock key areas, deeply cultivate core cities, metropolitan areas and core areas such as the Yangtze River Delta, pearl river delta, Beijing-Tianjin-Hebei, Chengdu-Chongqing Twin Cities Economic Circle, and Hainan Free Trade Zone, and seize business innovation and development opportunities.

The third is to actively grasp the development opportunities of green and low-carbon economic development and the strategy of "carbon neutrality and carbon peaking", gradually introduce ESG investment concepts, increase investment in green industries such as new energy, electrification, energy conservation and environmental protection, and support the innovative development of green technology enterprises.

Objectively, more attention must be paid to equity asset allocation

Brokerage China reporter: There are views that investment is shifting from debt investment to equity investment era, what new requirements and challenges are put forward for insurance asset management? Does the allocation of large asset classes need to be adjusted?

Li Wei: This needs to be viewed from several aspects.

From a long-term perspective, China's social and demographic structure is facing a profound transformation, labor supply will face a transformation from abundance to shortage, the potential economic growth center will face the next step process, superimposed financing structure changes and market behavior and other multiple factors, interest rate center will face a long-term trend downward. At the same time, the risk premium after the new asset management regulations showed an upward trend, and under the situation of high credit risk after the promulgation of Circular 15, the space for returns through sinking credit needs to bear greater pressure, the attractiveness of debt assets has declined, and traditional fixed income assets are difficult to meet the requirements of income matching on the liability side.

With the acceleration of the transformation of the economic structure, the reform of the capital market has gradually deepened, equity investment can better share the fruits of transformation and growth, and the attractiveness of equity investment has been enhanced. Therefore, it is objectively required that insurance companies must pay more attention to the allocation of equity assets.

Considering that insurance companies will fully implement the new accounting standards for IFRS9 financial instruments in the future, increasing the proportion of equity asset allocation will increase the profit fluctuations of insurance companies. Therefore, insurers need to weigh between yield and volatility to find the optimal allocation ratio.

In general, the asset allocation of insurance companies still adheres to starting from risk preference, combined with marginal changes in the capital market, according to the constraints on the cost of liabilities, the pressure of maturity and redistribution, etc., dynamically looking at the adjustment of equity and debt allocation, using fixed income assets as ballast stones, and attaching importance to the contribution of primary and secondary equity assets to performance flexibility.

There are several ways to deal with it:

First, asset allocation is systematic.

The second is the productization of portfolio management.

The third is diversification of investment strategies. This should strengthen the refined management of strategic allocation, reduce the volatility of equity assets by allocating different types of equity asset strategies, such as appropriately increasing the allocation of equity assets with low volatility and higher dividend yields; reduce the price fluctuations of equity assets through the low correlation between strategies; increase the mining of fixed income assets and alleviate the allocation pressure of fixed income assets, such as appropriately increasing the allocation of REITs assets and portfolio asset management products.

The fourth is to promote the technology of operation management and strengthen the enabling role of financial technology and quantitative investment in investment analysis and risk management.

It is expected that the value of insurance asset management in REITs will deepen

Brokerage China reporter: This year's first batch of public REITs products listed, China Re also participated in the investment, how to see the future insurance asset management opportunities in the field of REITs?

Li Wei: REITs are a supply-side reform and innovation in the large asset management industry, and may become a mainstream direction for the innovation and development of the asset management industry in the future. The value role of insurance asset management in REITs will gradually deepen with the development of the market.

In the early stage, insurance asset management mainly played a good role as institutional investors. It is necessary to cultivate internal skills, from qualified investors to excellent investors, so that when subscribing to REITs products, they can have better pricing capabilities, asset allocation capabilities and risk management capabilities, and obtain good investment returns.

In the middle and late stages, if the policy allows, insurance asset management can explore investment consultants and other ways to initiate and manage as products. Insurance asset management institutions can give full play to the advantages of alternative investments, explore reserve high-quality assets and projects, lay out in advance from the underlying assets of REITs, participate in the creation of REITs and the issuance of related asset management products, and change from a simple buyer to a "seller" and "product manager" with achievements.

In order to promote the better participation of insurance asset management institutions in REITs, we look forward to the regulatory authorities to improve the entry mechanism, issue clear policy guidelines, further encourage insurance funds to enter the REITs market, give full play to the advantages of insurance asset management in their own, and carry out REITs-related business.

Under the "two-eight effect" of the industry, small and medium-sized insurance asset management should find a growth pole for development

Brokerage China Reporter: What is the situation facing insurance asset management? There are about 30 entities in the insurance asset management industry, how to look at the future competitive landscape?

Li Wei: The development of the asset management industry is a comprehensive mapping of macroeconomics, capital markets, social environment and financial ecology. At present, the global epidemic situation generally tends to ease, the domestic economy continues to recover steadily, macro policies adjust across cycles to increase the momentum of domestic demand repair, the value of capital market allocation continues to increase, and the market situation is generally beneficial to the development of insurance asset management institutions.

Of course, favorable factors include the outbreak of wealth management demand, the deepening of the aging of the population is expected to drive the marketization and specialization process of the pension system, the deepening and development of the capital market, and the creation of a larger market space for asset management institutions. In addition, the regulatory policy is further market-oriented, in terms of source of funds, sales channels and other aspects of unified insurance asset management development and trust, bank wealth management, securities companies and other comparable industries regulatory requirements, at the end of 2021 the transition period of the new asset management regulations is coming to an end, the new large asset management financial ecosystem will create new market development opportunities.

From the perspective of the insurance asset management industry, comprehensive asset management institutions have shown certain scale advantages, relying on the advantages of their parent company's resource synergy, brand effect, capital channels, research strength, etc., as well as the comprehensive advantages of equity and debt at the business end and the linkage of the primary and secondary markets, providing the market with a relatively complete range of diversified strategic asset management products and services, and the diversified operating characteristics can better cope with market fluctuations. In the past two years, although the concentration of the scale of head institutions in the market has decreased slightly, it has also spread mainly among head institutions. Last year, the net profit of the four head companies accounted for 69% of the total net profit of all 27 companies, and the "two-eight effect" of the industry was significant.

In addition to the limited head institutions, the profitability of small and medium-sized insurance asset management companies has its own characteristics, and each institution relies on its own business advantages to divide labor and differentiate development in different fields, and the industry as a whole shows a diversified and good development trend. However, it is also necessary to see that small and medium-sized insurance asset management institutions in the market environment with changeable styles and high volatility, relatively limited investment strategies, business scope and technological cost input disadvantages, etc., are vulnerable to market shocks in comparison, and the challenge of obtaining long-term excellent performance is greater, and it is urgent to find a characteristic business model and development path that matches their own genes, culture and capabilities.

Brokerage China Reporter: What will be the development direction of China Re Assets? Especially from the perspective of a new starting point for development.

Li Wei: Standing at a new starting point for development, the "14th Five-Year Plan" of China Re Assets further clarified the development direction of market-oriented development, further optimized the strategic layout of wealth management, and created a new growth pole for medium- and long-term development; further implemented the business idea of productization-driven marketization, and improved the third-party business management system; further enhanced the "customer-centric" wealth management capability to build the company's core competitiveness; and accelerated the formation of a professional layout of two-wheel drive and coordinated development of service group system funds and third-party business funds. Become a "group system unified investment business platform and customer trust and recognition of the value creation platform".

Brokerage China Reporter: What are the specific strategic opportunities and paths of the company? How do you analyze the challenges you face?

Li Wei: We have mainly identified several aspects of the specific opportunity path. First, in the field of pension investment, wealth management, dilemma asset investment and other areas with long-term potential, under the right conditions, seek win-win cooperation to promote strategic layout breakthroughs; the second is to consolidate and enhance the professional strength and brand influence of their own inherent fields, actively dock advanced investment management experience at home and abroad, give play to the advantages of "multi-asset - multi-strategy - multi-manager", enrich the product system, enhance product supply capacity, and serve a wider range of customers; the third is to give play to the advantages of shareholders' characteristics, with the help of overseas insurance business, Global layout and overseas investment layout, in the internal and external linkage, deepen cooperation, insurance and common progress to find new opportunities, especially in overseas fixed income investment, global stock investment, global alternative investment and other fields to improve the business layout.

At the same time, we believe that China Re Assets is facing both new development opportunities and a comprehensive understanding of the pressures and challenges it faces. For example, in the face of short-term macroeconomic and capital market uncertainties, as well as new changes in regulatory rules such as IFRS 9 and second generation of compensation in the future, the difficulty of asset allocation and investment decision-making has increased significantly. There is an urgent need to comprehensively improve investment management capabilities and further deepen the understanding of the direction of economic and industrial development; it is necessary to deeply explore new paths for the development of third-party businesses that are suitable for the company's differentiation, specialization and specialization. At the same time, in building a solid risk bottom line, we must not relax at any time. In addition, it is also necessary to continue to promote the strengthening of financial technology leadership, the promotion of digital transformation, the improvement of market-oriented institutional mechanisms, and the realization of the common promotion of employees and the company's value.

Develop third-party businesses and shift from "managing assets" to "serving customers"

Brokerage China Reporter: Third-party business is an area that insurance asset management companies attach importance to, what is the plan for third-party business? What do you think of your strengths and potential?

  Li Wei: China Re Asset Management is one of the first batch of "old four" insurance asset management companies established in China, and it is also the only reinsurance asset management company, which has its own uniqueness. "Reinsurance" gene has given the company the development concept of "specialization, marketization and internationalization", and for a long time, China Re Assets has formed a stable and excellent investment performance, a steady and prudent investment culture and diversified asset allocation capabilities, which is fully reflected in the past performance and the company's business layout.

Facing the future, we believe that in the face of a changing development environment, the improvement of professional capabilities still has a long way to go. Therefore, China Re Assets will also work hard to improve its product supply capacity, customer service capabilities, service insurance main business capabilities and implementation of national strategic capabilities. On the basis of traditional advantages and capabilities, we will innovate, be closer to the real economy and local needs, and expand the development of asset management and wealth management, asset management and investment banking. This is all closely related to the development of third-party businesses.

Specifically:

The first is to explore the output of asset allocation schemes. The use of funds has changed from "managed assets" to "serving customers", using the management capabilities of all licenses and varieties of insurance asset management to strengthen product capacity building, improve product and strategy layout, create customized investment solutions for customers, and carry out customized operation services for third-party customers.

The second is to provide customers with comprehensive financial services through the integration of investment and financing. Realize tailor-made investment and financing planning schemes, realize reasonable investment in assets, meet various financing needs, and enhance differentiated service capabilities for customers under the condition of ensuring reasonable cash flow.

The third is to consolidate the basis of tapping key customers and explore cooperation models for core customer groups such as banks and insurance. Gradually establish a sales team and sales network that adapts to the business development situation, understand the needs of investors through investor behavior analysis, and provide more targeted products and services.

Service Gaoke: Strengthen cooperation with institutions and launch good products

Brokerage China reporter: Productization is the new direction of third-party asset management business, the current product advantages of asset management companies are mainly for institutional customers, how to see the opportunities of high-net-worth customer group business? What are the new ideas of China Re Assets in productization?

Li Wei: The wealth management business of high-net-worth clients has great room for growth. According to data, China's high-net-worth individuals (individuals with investable assets of more than 10 million yuan) will reach 2.62 million at the end of 2020, and it is expected that nearly 3 million by the end of 2021, with each capita holding investable assets of more than 30 million yuan. At present, in the field of high-end wealth management, the private banking department of the bank and the public fund have formed a relatively mature business model and business foundation by virtue of the first-mover advantage, and the insurance asset management company is still in its infancy, and is in the initial basic stage in terms of business system, customer service system and customer recognition.

In terms of serving high-net-worth clients, we have formed several major ideas:

The first is to adhere to win-win cooperation and change from sticking to borders to opening up and symbiotic expansion capabilities. Strengthen cooperation with institutions with market channels, customer bases, and product advantages, such as banks, securities companies, and head financial technology institutions, give full play to the experience of insurance asset management institutions in long-term capital management, large-scale asset allocation, absolute income account management, etc., and launch our good products.

The second is to adhere to product innovation and provide customers with high-quality products with reasonable risks and returns. We believe that wealth management is not a blind pursuit of high returns, and controlling volatility and improving the experience of holders is the primary goal. At present, China Re Assets has a certain layout in "fixed income +" products, equity FOFs, active equity and other products, and through the use of derivatives such as stock index futures to hedge equity asset volatility and tail risks, it will continue to improve the product line layout in the future, provide customers with products with good holding experience, and establish brands and reputation in key segments.

  The third is to adhere to the customer's perspective and provide a full range of end-to-end life cycle wealth management services. Insurance asset management institutions manage liabilities and funds for a long time, best understand the capital needs and risk preferences of the client, and have full license and full variety of investment management capabilities. In the future, China Re Asset Management will give full play to the advantages of insurance asset management wealth management services of "value investment, balanced allocation and steady returns", build trust with professional services, enhance stickiness with value creation, guard security with risk management, and provide full-cycle services for high-net-worth customers.