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Looking ahead to JANA’s Annual Conference 2019 in Melbourne, our Chief Investment Officer Steven Carew caught up with the AFR to run through the exciting program of speakers.
JANA chief investment officer Steven Carew says closed insurance books are a good match for large superannuation funds looking for yield in a low interest rate environment and to expect more deals of this nature in the near future.
JANA's Steven Carew said the trend of super funds taking businesses private would continue. Supplied
“There is a lot of activity in the insurance sector as insurers seek to free up capital and sell their closed books," Mr Carew said.
"If you have a good understanding of the asset and can manage it well, there are some quite attractive and high-yielding opportunities."
JANA is one of Australia’s top asset consultants with over $550 billion of investments under advice, including some of the nation's biggest super funds such as AustralianSuper, which bought education company Navitas for $2.1 billion as part of a consortium.
Mr Carew - a former Macquarie banker and 20-year JANA veteran - was speaking ahead of the firm’s annual conference for institutional investors, entitled 'Looking through the noise for long-term return drivers', to be held in Melbourne on Thursday.
"No asset class looks particularly attractive in terms of historical valuations and we are trying to balance that against a view that there are very supportive conditions in terms of monetary policy. Valuations don’t look extreme either," Mr Carew said.
The challenge has led JANA to adopt an approach that is underweight global equities with an emphasis on Australian equities.
The house view is one where downside protection via fixed income is recommended, some cash and a healthy allocation to international assets in case of further falls in the Australian dollar.
JANA has become more focused on China's equity, bond and private equity markets as a source of returns. It is also warming to certain types of alternative assets that exhibit low beta or market correlation.
And that is where the unwanted assets of life insurance companies come in.
The life insurance space in Australia has been highly active over the last two years with ANZ, Commonwealth Bank and NAB selling their businesses to Zurich, AIA and Nippon, respectively.
More recently, AMP generated headlines after it unveiled plans to sell its closed book of life insurance to Sir Clive Cowdery’s Resolution Life before the deal was scuttled by the Reserve Bank of New Zealand, only to be revived some weeks later.
Mr Carew said he expected the trend towards super funds buying assets outright to continue as their assets ballooned as a result of mandated super flows, but accepted there were challenges to overcome.
“Some of the larger funds are funding opportunities in those areas where assets are mispriced for one reason or another and they can manage those assets differently and get an attractive return,” Mr Carew said.
Once funds put proper governance structures in place to ensure the relationships with small shareholders and boards are appropriately managed, there would be little opportunity for conflict, Mr Carew said.
Questions were asked about the AustralianSuper/BGH takeover of Navitas after the new owners sacked CEO Rod Jones and CFO Philip Mirams the day it took control and installed Mr Jones' son, Scott Jones, as his replacement.
Rumours of the death of the asset consulting industry were premature, Mr Carew said, noting that the team at JANA were busier than ever.
The firm was doing more than simply advising institutional investors about fund manager selection and asset mix, increasingly acting as a sounding board as their internal investment teams continued to grow.
JANA was founded by legendary business figure John Nolan in 1987 although he no longer is associated with the firm. The firm was bought by NAB in 2001 and in 2017, a group of executives acquired a 55 per cent stake in a management buy out.
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