Karl Happe, chief investment officer of Allianz Global Investors’ Insurance Related Strategies. Courtesy Allianz
Karl Happe, chief investment officer of Allianz Global Investors’ Insurance Related Strategies. Courtesy Allianz

Lessons from Allianz’s investment strategies



My co-author today is Karl Happe, chief investment officer of Allianz Global Investors’ Insurance Related Strategies. Although the strategies developed and deployed by Allianz are aimed at the insurance market, there are many important lessons that most investors would benefit from, in particular family offices.

Allianz Global Investors is a globally active asset manager and subsidiary of the Allianz insurance company. Allianz GI manages in total about €450 billion of equity, fixed income, multi-asset and alternative assets. The Insurance Related Strategies team manages about €140bn (Dh1.78 trillion) of fixed income and equity assets in five European locations with a team of 30 portfolio managers. The insurance-related strategy team’s clients include both insurance subsidiaries of the Allianz group, as well as third-party insurers, pension funds and captive insurance subsidiaries of industrial companies.

The main point in understanding insurance-related investment strategies, for our purposes, is that they are part of a core business. Conventional asset managers simply focus on managing an investment portfolio with their main goals and constraints tied to the return and risk of the investment portfolio.

In insurance-related investment strategies the investment strategy is developed in close coordination with the business to complement and enhance the core business. This requires managing issues that conventional asset managers do not normally deal with. The primary issue for the insurance business is, of course, regulatory issues that the core business not only needs to comply with but also needs to constantly update its understanding of such regulations and ensure that they are in compliance, not only in their core business but also in their investment portfolios. Conventional managers can rarely do this, especially over multiple regulatory environments.

The second issue relating to developing an investment strategy that is part of a business is that the goals and constraints for the portfolio are different. A conventional asset manager will usually have as a primary aim maximising risk-adjusted returns. An insurance-related investment strategy will link its strategy to the core business. For example, many reinsurance businesses are highly volatile businesses which might lead insurance-related strategies to seek higher volatility portfolios in uncorrelated markets relative to a conventional manager.

From the family business point of view, the goals and constraints of their investment portfolios should not be developed based solely on asset management best practices. A deep understanding of the core business is integral to developing a successful family office investment. Too often local family offices use conventional asset management thinking to conclude that they should invest their assets in markets external to their core business so as to achieve diversification. In other words, let’s invest in areas that we don’t know and don’t understand in the hopes that we can complement our successful core business.

Allianz’s philosophy teaches us to look at how to complement rather than decouple the investment portfolio from the core portfolio. One idea might be to diversify sectors by investing in the same geographies as the core business, sharing expertise and simply investing in a global index for diversification.

Another area that Allianz’s insurance-related strategies works closely with its clients is asset liability management. This is just as important for other businesses. Does the investment team know, let alone actively manage, the upcoming cash needs of the core business? The usual family solution of a CFO who has no treasury management experience interfacing with a conventional asset management team, whether internal or external, often ends in failure and the unnecessary use of expensive bank lines to cover liquidity gaps. This function is so important that Allianz offers its asset liability management services to large enough customers. It does an analysis of the maturity structure of a company’s financial commitments and the uncertainty of when and how much these could be, and then it optimises the investment allocations to various assets to ensure that for normal liquidity events, cash is always sufficiently available to cover them.

For less common, but nonetheless possible special liquidity requirements, Allianz ensures that the investment portfolios have sufficient easily saleable investments to cover unlikely but foreseeable cash shortfalls.

The Allianz Global Investors’ Insurance Related Strategies team managing these multiple facets to the service they provide not only to their parent company but also to companies across the world is a balanced scorecard. As opposed to conventional managers who will simply state “we aim for a Sharpe of 2.3” or even a simplistic “our goal is a 30 per cent IRR” the Allianz team will sit down with their clients and ask them what their objectives are and the priority of these objectives. Over an iterative process the team will agree a scorecard with their client and review it on a regular basis to check if performance is matching objectives and if the objectives have changed.

Whether you have the US$100 million to contract Allianz’s services or whether you wish to simply improve your personal family office, ask yourself this: do you want a restaurant that when you sit down they tell you your meal will be a steak, medium, with mashed potatoes? Or do you want a restaurant that gives you a menu and asks you what would you like?

Sabah Al Binali is an active investor and entrepreneurial leader with a track record of financing, building and growing companies in the Mena region. You can read more of his thoughts at al-binali.com. Karl Happe is the chief investment officer of Allianz Global Investors' Insurance Related Strategies.

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Some of Darwish's last words

"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008

His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.

Premier Futsal 2017 Finals

Al Wasl Football Club; six teams, five-a-side

Delhi Dragons: Ronaldinho
Bengaluru Royals: Paul Scholes
Mumbai Warriors: Ryan Giggs
Chennai Ginghams: Hernan Crespo
Telugu Tigers: Deco
Kerala Cobras: Michel Salgado

Aquaman and the Lost Kingdom

Director: James Wan

Starring: Jason Mamoa, Patrick Wilson, Amber Heard, Yahya Abdul-Mateen II 

Rating: 2/5

Indika

Developer: 11 Bit Studios
Publisher: Odd Meter
Console: PlayStation 5, PC and Xbox series X/S
Rating: 4/5

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Company name: Fasset
Started: 2019
Founders: Mohammad Raafi Hossain, Daniel Ahmed
Based: Dubai
Sector: FinTech
Initial investment: $2.45 million
Current number of staff: 86
Investment stage: Pre-series B
Investors: Investcorp, Liberty City Ventures, Fatima Gobi Ventures, Primal Capital, Wealthwell Ventures, FHS Capital, VN2 Capital, local family offices

Company Profile

Company name: Hoopla
Date started: March 2023
Founder: Jacqueline Perrottet
Based: Dubai
Number of staff: 10
Investment stage: Pre-seed
Investment required: $500,000

TWISTERS

Director:+Lee+Isaac+Chung

Starring:+Glen+Powell,+Daisy+Edgar-Jones,+Anthony+Ramos

Rating:+2.5/5

TECH SPECS: APPLE IPHONE 14 PLUS

Display: 6.1" Super Retina XDR OLED, 2778 x 1284, 458ppi, HDR, True Tone, P3, 1200 nits

Processor: A15 Bionic, 6-core CPU, 5-core GPU, 16-core Neural Engine 

Memory: 6GB

Capacity: 128/256/512GB

Platform: iOS 16

Main camera: Dual 12MP main (f/1.5) + 12MP ultra-wide (f/2.4); 2x optical, 5x digital; Photonic Engine, Deep Fusion, Smart HDR 4, Portrait Lighting

Main camera video: 4K @ 24/25/3060fps, full-HD @ 25/30/60fps, HD @ 30fps; HD slo-mo @ 120/240fps; night, time lapse, cinematic, action modes; Dolby Vision, 4K HDR

Front camera: 12MP TrueDepth (f/1.9), Photonic Engine, Deep Fusion, Smart HDR 4; Animoji, Memoji; Portrait Lighting

Front camera video: 4K @ 24/25/3060fps, full-HD @ 25/30/60fps, HD slo-mo @ 120fps; night, time lapse, cinematic, action modes; Dolby Vision, 4K HDR

Battery: 4323 mAh, up to 26h video, 20h streaming video, 100h audio; fast charge to 50% in 30m; MagSafe, Qi wireless charging

Connectivity: Wi-Fi, Bluetooth 5.3, NFC (Apple Pay)

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I/O: Lightning

Cards: Dual eSIM / eSIM + SIM (US models use eSIMs only)

Colours: Blue, midnight, purple, starlight, Product Red

In the box: iPhone 14, USB-C-to-Lightning cable, one Apple sticker

Price: Dh3,799 / Dh4,199 / Dh5,049

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Started: 2017
Founders: Dr Noha Khater and Rania Kadry
Based: Egypt
Number of staff: 120
Investment: Bootstrapped, with support from Insead and Egyptian government, seed round of
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Dir: Rajkumar Gupta
Starring: Ajay Devgn, Ileana D'cruz and Saurabh Shukla

Verdict:  Three stars 

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Kassem Eid, Bloomsbury

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Director: Khalid Fahad

Starring: Shaima Al Tayeb, Wafa Muhamad, Hamss Bandar

Rating: 3/5

A QUIET PLACE

Starring: Lupita Nyong'o, Joseph Quinn, Djimon Hounsou

Director: Michael Sarnoski

Rating: 4/5

Getting there

The flights

Emirates and Etihad fly to Johannesburg or Cape Town daily. Flights cost from about Dh3,325, with a flying time of 8hours and 15 minutes. From there, fly South African Airlines or Air Namibia to Namibia’s Windhoek Hosea Kutako International Airport, for about Dh850. Flying time is 2 hours.

The stay

Wilderness Little Kulala offers stays from £460 (Dh2,135) per person, per night. It is one of seven Wilderness Safari lodges in Namibia; www.wilderness-safaris.com.

Skeleton Coast Safaris’ four-day adventure involves joining a very small group in a private plane, flying to some of the remotest areas in the world, with each night spent at a different camp. It costs from US$8,335.30 (Dh30,611); www.skeletoncoastsafaris.com

COMPANY PROFILE

Company: Eco Way
Started: December 2023
Founder: Ivan Kroshnyi
Based: Dubai, UAE
Industry: Electric vehicles
Investors: Bootstrapped with undisclosed funding. Looking to raise funds from outside

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6.30pm: Maiden Dh 165,000 1,600m
Winner: Superior, Connor Beasley (jockey), Ahmad bin Harmash (trainer)

7.05pm: Handicap Dh 185,000 2,000m
Winner: Tried And True, Pat Dobbs, Doug Watson

7.40pm: Maiden Dh 165,000 1,600m
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8.15pm

Handicap Dh 190,000 1,400m
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8.50pm

Handicap Dh 175,000 1,600m
Winner: Welford, Richard Mullen, Satish Seemar

9.25pm: Handicap Dh 175,000 1,200m
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10pm: Handicap Dh 165,000 1,600m
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Editors: Siobhan Lambert-Hurley, Daniel Majchrowicz, Sunil Sharma
Publisher: Indiana University Press; 532 pages

SPECS

Engine: 1.5-litre turbo

Power: 181hp

Torque: 230Nm

Transmission: 6-speed automatic

Starting price: Dh79,000

On sale: Now

EMIRATES'S REVISED A350 DEPLOYMENT SCHEDULE

Edinburgh: November 4 (unchanged)

Bahrain: November 15 (from September 15); second daily service from January 1

Kuwait: November 15 (from September 16)

Mumbai: January 1 (from October 27)

Ahmedabad: January 1 (from October 27)

Colombo: January 2 (from January 1)

Muscat: March 1 (from December 1)

Lyon: March 1 (from December 1)

Bologna: March 1 (from December 1)

Source: Emirates