When it formally launched a portfolio bond product into the UK market exactly one year ago, the Ireland-based, cross-border insurance provider said little about its plans, beyond the fact that it was targeting the top end of the market.
But now, in an exclusive interview with International Adviser, David Gregory, executive director of UK and international business, explains how Generali PE is breaking what he said has been a 14-year industry tradition of limiting the investments in offshore bonds – or “international” bonds, as Generali PanEurope prefers to call them – to collective investments, such as funds.
He cited market demand among HNWI wealth managers for the company’s decision to allow a much wider selection of assets in its portfolio bonds, including direct equities, corporate bonds, and even derivatives.
“If you’re a wealth manager or a private bank, whose clients are wealthy, you are accustomed to buying assets directly, rather than through funds,” he explained.
“The custom of limiting the assets held in bonds to collectives has always been a big objection for some of the major wealth managers. They like the benefits of the tax wrapper, but they have always hated the constraints that limit what they can hold in it.”
The tradition of limiting offshore bond assets to funds is said to date back to 1999, when legislation known as the Personal Portfolio Bond Regulations was implemented in the UK.
Although the option of appointing a discretionary manager and buying a range of asset types was “always there”, Gregory said, until the last few years, “there was never a demand for it”.
What changed was a package of regulations known as the Retail Distribution Review (RDR), which was unveiled in 2008 and took effect earlier this year, and forced wealth managers and advisers to disclose all fees and charges to their clients.
Coinciding with this, the investment climate changed dramatically following the global financial crisis in 2008, resulting in a plunge in the returns most investment products are able to generate.
Among the companies that are understood to be looking into adopting a similar approach to GeneraliPan Europe’s with their offshore bonds are Axa and Legal & General International, market sources report.
Generali PanEurope is an arm of Triest-based Assicurazioni Generali, one of Europe’s largest insurance groups.
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