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Why AllianzGI is Expanding its Product Suite

November 29, 2017


DOUGLAS EU: I think the thing that we realize is that, with all the changes in financial markets, lots of things that banks used to do, they don’t do anymore. And so those sorts of things have moved their way into the asset management space. We call them alternatives. For me, that’s a funny word because I was always start with, what’s it an alternative to? It’s an alternative to stocks and bonds. Okay, so it’s just another asset class that you can invest in but has different characteristics. From my perspective, it isn’t any different than talking about Indonesian stocks versus U.S. stocks. It’s just—they’re alternatives to each other.

And I think where we have gone as a firm is we recognize that more and more of the investment world—you’re sort of stuck—not “you” as an advisor—but I think advisors generally are sort of stuck in a narrow conversation around stocks and bonds and maybe around U.S. stocks versus international stocks versus emerging markets stocks. There’s a broader conversation out there. If I look at where I invest, what I invest in is a lot broader than that. It includes private equity. It includes obviously housing and all kinds of other things. Well, why don’t those fit into a broader conversation around investments as a firm?

And so we have—and a lot of this is obviously being driven by the institutional client base where they’ve moved on in their conversation. One of the big insights for me is when I was working in Asia after the Asian financial crisis, we had lots of insurance companies who came in. So, Allianz is a large property and casualty insurance company and they wanted to have a conversation with us about co-investing in products that the Allianz Group invested in in terms of infrastructure. I said, well, that’s a really interesting conversation. I grew up in an industry where you talked about investments and returns and they’re coming in and saying, well, we have this liability. We can’t buy 30-year bonds anymore. I’d like to buy a 30-year infrastructure debt product that’s wrapped as a fund but looks a lot like a 30-year bond. You guys have some relatively stringent requirements and so you’re creating an investment grade there. Wow, this is really interesting language.

But as I see that happening on the institutional side, the question for me is, at what stage do we stop as an industry and, really, as a fund management company, talking about investments just in terms of where returns are and start thinking about it more as liability matching. I mean, I take the whole retirement conversation—I’ve made a personal decision that I’m probably going to retire in Hong Kong, because I spent a lot of my life living there and I happen to like the lifestyle. So when I start thinking about my own retirement and hedging, I start with a conversation around currency. That’s not a conversation we have here. So I looked at my own 401(k) and said to my 401(k) committee, where’s my Renminbi hedge in here? Because I’m going to live in Hong Kong. I don’t see it. Said, tough luck, you just have to buy one of these other things.

Well, okay, that’s fine, that’s what the industry looks like today. I have to buy one of those things there. But, as I have those different conversations, the reality is that the world opens up to much, much broader conversation about what one can invest in and what one should invest in. And I think one of the things that we as a company need to do a better job of, and we’re trying, is to figure out how we take some of those asset classes and put it into—I call them “wrappers.” So I think about the world like Coca-Cola. Yes, I can buy Coke at McDonald’s. I can take a bottle of it, a can of it. In Japan, I get a 200 milliliter can because they have small vending machines. So, Coke just takes the product, throws it in lots of different wrappers.

Well, in a way, that’s sort of what we’re doing and as an industry we have to take some of these more interesting things, products, investments and put them into more interesting wrappers for the client base. So what works for you? And I think a lot of that is—it’s not us against, it’s not fund management companies against advisors. It’s how we do this together. Because you have the answer to the specific micro-problem of your client base that help us to think about what is it that we can use.

And it goes back to that conversation with the insurance company. We have a liability that’s 30 years. That one matches up pretty good. We’re happy to hedge it.

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