It is still a “very tough balancing act,” said Maguire. “It’s a tough gig in the sense that life companies have big assets and liabilities on their balance sheets to offset their policies.
“Asset managers, on the other hand, are able to be very balance sheet light with high margins and low capital intensity. And they don’t have to meet some of the same solvency requirements the insurers are bound to.”
No template
Liontrust Macro Equity Income co-manager Jamie Clark agrees that there is no one size fits all approach for life companies that have made a push into the asset management world.
“There is not one particular model they are all following,” he said.
“Legal & General Investment Management is the standout for me because of their strength in the passives industry. That is the template that all asset managers would like to follow.”
Macguire has a different take on this. He thinks if the major life companies, LGIM included, want to get a leg up, they need to be pursuing more active strategies.
“Passives are popular because markets have gone up a lot. At the time, it is a strategy that suited both bond and equity investors but now looks to us to be the worst place to allocate money, especially if markets don’t keep going up all the time.
“The problem with passives is they guarantee all the downside. You don’t want to be sitting in one when markets start to get nervous. And you could argue we are at the top of market cycles for bonds and global equities are starting to look like that too.”
