For insurers, funds easier to get than managersKhyati Dharamsi/ DNA MONEY | Wednesday, 15 October , 2008, 08:59
Insurance companies may be set to become the biggest players in the Indian stock market, what with all the money flowing into their schemes, but they just don't have the people at the top to manage the swelling corpus. In short, insurance firms are finding the position of chief investment officer (CIO) hard to fill. HDFC Standard Life has been unable to find a replacement for its erstwhile CIO, Sourabh Nanavati, who joined a mutual fund house in early 2008. Domestic life insurers insulated from global crisis Paresh Parasnis, general manager — operations at HDFC Standard Life, said last month, "We have been looking for a replacement but haven't been able to do so." The position was still vacant as of Monday. Kotak Old Mutual Life Insurance has also been left without a CIO after Bryce Johns left the firm. Attempts to get in touch with Kotak Old Mutual proved futile, but Johns' former secretary said he resigned in August. Insurers pull out all stops in battle of technology Vikram Kotak, CIO at Birla Sun Life Insurance Company, said, "With expectations of robust growth in assets going forward, a dedicated in- house fund management team has become a pre-requisite." HDFC Standard Life has always been taking advice on investments from HDFC portfolio management services for managing assets. However, the recent regulatory guidelines may soon set out of business the advisory model many in the industry, which manages assets worth Rs 8,47,000 crore, have been following. More India business stories The Insurance Regulatory and Development Authority (IRDA) recently said that every life insurance company needs to manage its own investments instead of outsourcing that function. The IRDA amended the investment regulations to ask for in-house fund management operations in life insurance companies. Before December 2008, all insurers having assets above Rs 500 crore will need to have a dedicated investments head and research team to manage funds in-house. In a disincentive to those seeking investment advisory, the regulator has asked companies outsourcing the investment function to pay money out of their own pockets rather than expense it to the policyholders. Predictably, insurance companies are on the lookout for CIOs aggressively now — a bit ironic, considering the major chunk of their business has been from unit-linked insurance plans. Firms such as Tata AIG Life, Birla Sun Life Insurance Company, Max New York Life Insurance and Shriram Life Insurance have snapped their advisory tie-ups with the portfolio management arms of asset management companies. An industry source said that even those who have recruited CIOs have done so in letter and not in spirit. Sunil Kakar, Director-Finance and CFO at Max New York Life Insurance, who also handles investments, says: "We have transited to in-house fund management to some extent. We have a 6-member research team and we plan to recruit more to make it an 8-10 member team. We have to recruit on the fixed income side and now credit analysis too is important." The company discontinued its tie-up with Franklin Templeton Investments (India) in May 2007. As per the amended guidelines, the front office shall report through the CIO to the CEO, while the mid office and back office, to be headed by separate personnel, shall be under the overall responsibility of CFO who shall independently report to the CEO. Clearly then, a CFO cannot hold the post of CIO simultaneously. Kakar says in-house talent will be used to head the investments function. "As per new regulations, there have to be different people for investments and finance. The same would be implemented." R. Krishnamurthy, MD of leading consultancy firm Watson Wyatt says, "Getting a research team in place is not going to be easy. Equity analysts and specialists are not easy to get. It will take quite sometime." In-house management of funds will be a new concept for international life insurance firms as the outsourced arrangements are common abroad, says Krishnamurthy. "Having a new model in India will be difficult for them," he adds. Meanwhile, the new entrants into the industry have decided to snap the advisory model and have already recruited in-house fund managers with strong research teams. More India business stories Nitin Chopra, CEO of Bharti AXA Life Insurance, said, "None of the fund managers in insurance industry is that famous. That function needs to come up. We have a 12-member investment team, headed by Abhijeet Gulanikar." Future Generali MD & CEO Jayant Khosla said they had a dedicated CIO and an investment team, with a dealing room in place. Shriram Life Insurance Co, meanwhile, has snapped its tie-up with Deutsche Bank and appointed group official Hariharan as the CIO. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups "Kences1" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/kences1?hl=en -~----------~----~----~----~------~----~------~--~---
