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Friends Life mandate with AXA IM handed over to Aviva Investors

Aviva Investors is set to follow the windfall of assets from its parent company’s takeover of Friends Life by securing a mandate in 2016 managed by AXA Investment Managers (AXA IM).

Friends Life, previously one of the UK’s largest insurers before its takeover by rival Aviva, managed its £75bn (€105bn) of assets through an in-house fixed income manager, AXA IM and Schroders.

However, Aviva’s asset management arm Aviva Investors is now set to take on a significant amount of the assets, having already transferred its nearly £21bn of in-house fixed income assets into its organisation.

Aviva Investors currently manages around £245bn in assets, around 80% of which is for the insurance parent firm.

Mark Connolly, global CIO of fixed income, said Aviva Investors would also look to transfer assets from AXA IM, including £8bn of fixed income, into the company by 2016.

AXA IM said it would not comment on market speculation.

Schroders took on a £12.2bn mandate from Friends Life shortly before the takeover.

However, Connolly said Aviva Investors would look to convince its parent firm to hand over these assets in time.

The £12.2bn of equity, multi-asset and fixed income products are all areas where Aviva Investors built up competence or has an existing track record, Connolly said.

Connolly, who joined the asset manager in January from the former Scottish Widows Investment Partners (SWIP), said the organisation was set to increase its third-party assets and would commoditise the strategies built up for its parent firm.

Aviva Investors manages a liability-driven investment (LDI) strategy for the nearly £15bn Aviva Staff Pension Scheme, built on what Connolly said were core competences necessary for its primary insurance client.

He said, where appropriate, the asset manager would look to offer this “liability-aware” strategy to defined benefit pension schemes and long-term liability matching investors.

It will comprise four separate strategies, including an illiquid asset core, made up of real estate and alternatives, which Connolly said should reduce the cost of pension schemes financing their deficits.

The other three blocks will be made up from high-quality credit to provide cash flows and UK Gilts and derivatives to bind the strategies together, and added to Aviva Investors’ diversified growth fund for alpha exposure.

The takeover of Friends Life was completed earlier this year, with chief executive Mark Wilson highlighting Aviva Investors increasing its assets and profit contribution to the group as a key outcome.

Aviva Investors chief executive Euan Munro joined in January 2014 and set about overhauling the brand image of the asset manager, which suffered key-man departures and third-party asset outflows.

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