As summer officially ends and one is reminded of fall activity, winter, and even the dreaded snow of the future, we are reminded of the connection between the enjoyable summer vacation and business. When flying, one often encounters the “hurry up and wait” syndrome; passengers rush into the airport, through security, past the gate, and end up in a snail-paced queue onto the plane.
Returning from a restful vacation offers an opportunity to examine the investment business, and to ensure that our firms don’t operate like the aforementioned boarding lines. During the past few years, firms have been too slow to act because of the financial crisis, due to the fear and uncertainty created. Now that we are almost 2 years past the crisis, it is time to take advantage of the end of the summer and move forward. Fall is an ideal time to evaluate a firm’s strengths and unique advantages along with goals, to determine what actions are essential for success. In order to thrive, an investment firm needs to make true investments of its own—not just in securities for its clients—but in growing the business. Planning is essential, but equally important is taking action, whether in hiring staff, or making lift-outs and acquisitions. There is no time like autumn, with the thoughts of crisp air, to plan to succeed, and to succeed by moving forward.
September 3rd, 2010
Since I posted comments earlier in the week about insurance companies trying their hands as asset managers, a few people have asked me to comment on a related business: managing money for insurers. This is something I know quite a bit about, having spent a good part of my career focused on it. Recently, it seems, a number of asset managers are looking at this segment, either for the first time, or to reexamine their current efforts. The pool of assets is large, so it is certainly worth considering as a target segment.
Insurance companies hold assets in two very different pools: their general account; and their accounts held on behalf of others, technically called the “separate account” of the insurer. Variable annuities and mutual funds are often part of the “separate account.” Unaffiliated asset managers often manage funds within the variable annuity or mutual fund family, or subadvise to these fund families. To the asset manager, this business is very similar to the mutual fund business in terms of asset classes, pricing, and manager selection.
The general account constitutes the insurer’s own funds. This is the pool of assets most managers think of when they consider the specialized segment of insurance companies. Largely a fixed income portfolio, this pool also often contains some equities and alternatives. The fixed income frequently includes specialized fixed income sectors.
The business of managing insurance companies’ general accounts is quite competitive, demanding very specialized knowledge and capabilities, and is often fee sensitive. However, for those that make the investment, asset growth can be substantial. In addition, the use of specialized asset classes allows for greater fees.
The key to being successful in this business is carefully thought through business and marketing plans that are consistent with the strengths of the manager and the market opportunities. Missteps are easy to take, resulting in either failed efforts or unprofitable business growth. Caution is wise, but with proper expert strategy, the business can be quite successful.
October 14th, 2009
I’m working with a client who is now constructing a business/marketing plan. As I mentioned in my last white paper, a SWOT analysis is very helpful in this exercise, and it’s proven to be invaluable for my client. This technique analyzes stengths, weaknesses, opportunites, and threats, and it really helps one focus. It can help to quickly identify areas for improvement and where to really concentrate one’s attention. One important point: when planning, don’t get to the end of the process before bringing in team members and subordinates. You will always get valuable input, and investment management employees generally don’t appreciate a plan which is delivered to them for execution without having had any input.
August 19th, 2009
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